September 17, 2024 • 31 mins
Navigate legal challenges that small businesses face daily with insights from our special guest, attorney Pat Brady of Bergen and Parkinson. Learn how corporate housekeeping and record-keeping, such as maintaining up-to-date bylaws and operating agreements, can protect your business from potential liability risks. Pat talks the necessity of documenting significant decisions through consent resolutions and the importance of getting signatures on certain documents.
This episode is packed with actionable insights to help you safeguard and sustain your small business in a legally compliant and professionally sound manner. Don't miss it!
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is Small Business Big World, our weekly
podcast prepared by the team atPaper Trails.
Owning and running a smallbusiness is hard.
Each week, we'll dive into thechallenges, headaches, trends,
fun and excitement of running asmall business.
After all, small businesses arethe heartbeat of America and
our team is here to keep thembeating.
Welcome to Small Business BigWorld, our weekly podcast, where
(00:22):
we talk about all the fun andmiserable and exciting things
about running a small business,and this is one of those
miserable things about running asmall business.
It's kind of the top five legallandmines that small businesses
face on a daily basis.
So my guest, pat Brady,attorney extraordinaire here
from Bergen and Parkinson,welcome back.
Speaker 2 (00:41):
Yeah, thanks for having me, Chris.
Of course, good to be backSecond time around.
I know this.
Speaker 1 (00:44):
Welcome back.
Yeah, thanks for having me,chris.
Of course, good to be backsecond time around.
I know this will be a good onetoo.
I think we all worry aboutselling things and managing our
employees and keeping the lightson, but we sometimes don't
think about the paperwork andthe legal things that small
businesses do run into.
Speaker 2 (00:57):
So this will be a good one.
Speaker 1 (01:02):
So before we jump into it, don't forget like,
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We are on Instagram, facebook,spotify, tiktok, apple Podcasts,
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You know, if you're bored atnight scrolling, we're probably
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If you have any questions aboutanything we talk about today or
any of our episodes, feel freeto email us podcast at
papertrailscom and we will getyou in touch or get an answer
for you.
So thank you.
All right, let's start withnumber one legal landmine.
(01:25):
See if we can't lose a limbhere.
What do you think?
What do you think it's going tobe?
Speaker 2 (01:30):
Yeah, so I'm gonna, I'm gonna go number one
corporate housekeeping andrecord keeping.
Speaker 1 (01:34):
All right, so really exciting really exciting stuff.
Speaker 2 (01:37):
The stuff that just no one wants to do always seems
to fall by the wayside.
But you know can just show up.
You know, the lack of recordkeeping and good corporate
hygiene can just show up in amultitude of different ways.
Speaker 1 (01:50):
So what does that mean, right?
So what you're saying?
We all know we have to havefiles and records and things
like that.
What do you think smallbusiness should have, should be
keeping for good records and soforth in their corporate
structure?
Speaker 2 (02:00):
Absolutely so.
Of course there's always theaccounting records, right, and
we don't get.
I mean that those are important.
Those are not my.
You know, within my wheelhouseI know the importance of keeping
good tax records and all thatstuff.
But I'm more focused on thingslike your, your governing
documents, those documents thatyou file with the Secretary of
State making sure you keep yourannual reporting requirements up
(02:22):
.
And then the the documentsbelow that, like your bylaws,
your operating agreements, thatsort of stuff, making sure
you've actually got them one,making sure they're up to date,
they're actually reflecting thepractices of the organization,
how the organization's managed,how it's operated.
And then the ones that you seemissed most often are consent
(02:42):
resolutions.
Consent resolutions are goingto be votes that you actually
just take down on paper or youcan have minutes as well.
You really need to document thebig decisions of the
organization.
There's a couple of reasons forthat.
One is liability protection.
As a lot of people will know,when you have an entity, a
corporation, llc, whatever youhave you have liability
(03:07):
protection as an owner.
So sort of the things thathappen within that box are
isolated to that box and intheory they don't flow up to the
owners.
You can lose that liabilityprotection when you don't
observe the fact that it is itsown separate, distinct box.
And one of the ways youevidence that it is its own
living, breathing thing iskeeping good records.
If you're just sort of outthere helter skelter doing
(03:29):
whatever you want, not sort ofholding votes, observing what
your governing documents say,you could be exposed there to
some claim that you didn'tobserve the formalities of the
corporation so you're liable.
Speaker 1 (03:43):
So that's keeping the corporate book right.
That's the term for it.
Right, exactly.
And I think I've been to anattorney's office where they
have literally binders on theshelf for every business that
they work with.
Right, does that exist anymore?
Is everything digital?
Speaker 2 (03:55):
It does, it does yeah , and there is a start of a push
to move towards digital books,but most people still keep a
hard copy and within that you'vegot your document that gets
filed with the Secretary ofState, your articles, your
certificate of formation, you'vegot your operating agreement or
your bylaws, and then that'swhere you put your consent
(04:16):
resolutions as well.
Speaker 1 (04:17):
And with that, so are there things these days that we
still need to have a wetsignature on.
They need to be originals.
Great question, Because for me,I know the name of my business
is Paper Trails, but I don'thave a file cabinet anywhere in
this office.
It's a great question.
Speaker 2 (04:32):
And so there are two things that require wet
signatures still.
Those are things that are goingto be recorded in the registry
of deeds.
So you're talking deeds,mortgages, that sort of thing.
Those have to be wet signature.
And the second is anythinggoing to the Secretary of State.
The Secretary of State in Mainestill requires wet signatures.
(04:52):
Maine is an outlier in thatregard.
Speaker 1 (04:58):
Most Secretary of States are moving towards
accepting digital signatures.
Once you get it back, scan it,save it, you're good right?
Speaker 2 (05:01):
Yeah, exactly, you should keep the original deeds,
but the Secretary of Statedocuments.
Yeah, you can generally get ridof them.
Speaker 1 (05:10):
So anything that's recorded in the registry, one or
one signature physicallysomewhere, Yep, and then hang on
to that one Somewhere right,yep, and yeah, go ahead, and I
was going to say that's what wehave attorneys like you for
right.
Most attorneys if you, if youhave an agent of record, you're
usually keeping thatquote-unquote book right.
Yep exactly, so that'scertainly a helpful thing.
Speaker 2 (05:27):
Yep and the lack of record-keeping.
There's the liability piece andit shows up in financing
transactions.
Banks are going to want to seethose documents to see that
you're actually keeping those,maintaining those, and you don't
really want to be on the eve ofclosing scramble and running
around trying to piece it alltogether, exit transactions.
You know you don't want to bethat seller, that a buyer comes
(05:48):
in and asks to see yourcorporate records and you have
nothing to show them.
They're going to say you know,what were you doing all these
years?
How many skeletons are outthere, you know.
So it can show up in amultitude of different ways.
Okay.
Speaker 1 (06:03):
Well, good record keeping, housekeeping and the
corporate book, that's important.
That's number one, AbsolutelyNumber two.
Where are we going?
Speaker 2 (06:09):
number two yeah, contracts, I think contracts, or
maybe more particularly thelack thereof.
It always shocks me howcontracts are always.
It seems like such anafterthought in so many
instances, and the biggestreason, the biggest pitfall of
(06:29):
not having a contract isobviously trying to prove what
the deal is when things go south.
You know, did the parties agreeon this?
What were the fine points ofthe agreement?
That's one of the big issues.
The other big issue is that ifyou don't have a contract one,
there's a question of do youhave an enforceable deal?
(06:49):
That's one issue that you runinto, but the second is you're
left with whatever the law isgoing to apply to your deal.
So, for example, say there's adispute within this deal that
you apparently reached, you'regoing to go to litigation,
you're going to go to court tosettle that, whereas if you had
(07:11):
a contract, you could haveagreed in that contract to first
mediate things, keep it out ofthe court system and if
mediation wasn't successful, goto arbitration.
You don't get that.
If you don't have a contract,you don't have any of that.
You basically lose control of alot of different things.
You're subject to whateverwarranties the sort of general
(07:31):
body of law applies to yourcontracts.
So you're really just you'rejust sort of left out in the
wind when you don't have one.
Speaker 1 (07:39):
So I know, as a small business owner, I am presented
with an agreement or contract.
Often, for whatever service I'mgoing into, right, I'm going to
get something and I do with myclients, right?
I mean, we have our standardagreement that we work with
clients and, for the first timein a very long time, one of our
new clients is sending ouragreement to their attorney
before you know, and I know ourattorney drafted that and I know
(08:02):
it protects me and of coursethey're going to look to see
what protects them, of course.
Speaker 2 (08:05):
Yep.
Speaker 1 (08:05):
You know what, how often should business owners be
sending those day-to-daycontracts off to be looked at,
right, I mean sure, cause wealways say gosh, it's going to
cost me 500 bucks to send thisto, you know, to Pat, and he's
going to look at it and he'sgoing to right, yeah, that's a
really hard question and itreally comes down to what the
(08:27):
risk exposure is on the contract.
Speaker 2 (08:29):
I think If it's a contract to buy $100 worth of
widgets, if things go terriblywrong, you know it's probably
you think of the worst case thatwere to happen under that
contract.
If you sign it, if the worstcase is something you can sleep
at night with, then probablyfine.
But if it's anything more thanthat, it's going to keep you up
(08:50):
at night.
Speaker 1 (08:51):
If things go south it's definitely probably having
a second set of eyes, it's amajor vendor or a major
expenditure to your business.
Speaker 2 (08:57):
those types of things Exactly and the thing that you
can talk with your attorneyabout is sort of almost having
them educate you on what to lookfor.
You always want to be certainlythe business terms right.
I mean the business owner isgoing to be in charge of that
prices, quantities, time ofperformance, schedule, all that
sort of stuff.
But they can help youunderstand what things like
(09:19):
indemnities, what things likewarranties look like and what
they are, and so you can sort ofstart to spot check things.
And if it looks, you know, Imean you know you use your
judgment and your comfort level,but you can start as you get,
as you work with them, moreyou'll start to pick up on.
You know that doesn't lookquite right.
I don't feel comfortable withthat.
(09:40):
I'll send that one along versus.
You know I'm comfortable, Irecognize what that is.
Speaker 1 (09:44):
What about in more transactional businesses, Like
you're a retailer or arestaurant or I mean?
Certainly we deal with money,right, we move money around.
So it's important that we havea contract, yep, but you know
there's basic law that says if Ibuy something from you, there's
a quote unquote contract rightRight.
Yep, explain that.
What's that?
Speaker 2 (10:01):
Yeah, yeah.
So I mean you can.
A contract can take many forms.
A contract can be a handshakedeal.
I mean, you know, there's thislaw school example of when you
go to the counter and order asandwich.
You've just entered into acontract with the restaurant.
You've agreed to pay thisamount of money in exchange for
a sandwich.
That's contract, right there.
There's rules as to when thingshave to be in writing.
(10:25):
It's called the statute offrauds.
It's like real estatetransactions have to be in
writing.
Over a certain dollar amounthave to be in writing.
Time of performance, thesesorts of things have to be in
writing.
But generally, yeah, and youcan enter into a contract
unknowingly too.
There's case law out there thatsays that you send an email
(10:45):
with a signature, your signatureline can constitute your
signature to an agreement.
So the point is, yeah, you canenter into contracts in a
variety of different ways andthey don't have to be your
conventional, you know, writtendoc.
Speaker 1 (10:59):
Well, maybe now these days, with all the crazy people
suing everybody, maybe we wantto have a contract for selling
that hamburger, right?
If you get sick, we're notliable.
If you, you know you can't puta bad Google review on us.
You can't do.
You know all those things right.
Because customer service isbecoming more and more crazy.
Speaker 2 (11:14):
Yeah, and to circle back to the first one, you know
if you are going to do acontract it sounds so simple,
but make sure you actually getan executed copy of it.
And this shows up all the timein sale transactions, where a
buyer will come in and ask tosee all your contracts and you
either A can't produce thecontract.
(11:34):
You know one exists but youcan't produce the contract.
You know one exists but youcan't produce it because either
it was just like saved an emailand lost, or you just never
saved it.
Or if you can find a copy, it'sit's only like partially
executed.
You know like you signed it andyou sent it back for signature
but you never got the signedcopy back.
So it's not glamorous, but it'simportant to stay.
(11:55):
You know, stay on those sortsof things and make sure you
actually get the signed copyback.
So it's not glamorous, but it'simportant to stay.
You know, stay on those sortsof things and make sure you
actually get the signed contractback and good record keeping.
Speaker 1 (12:02):
Exactly Back to number one Yep, exactly.
All right, let's go to numberthree.
What's number three?
Speaker 2 (12:06):
Yeah, and this is more of a kind of amorphous
concept, but it's the importanceof kind of, when things start
to go south, make sure you getyour position out early and put
people on notice that you takeobjection to what is going on.
Speaker 1 (12:28):
In writing.
Speaker 2 (12:28):
In writing.
Yes, oh yes, absolutely.
And it doesn't need to be fancy, it can be an email and there's
an art to it.
You don't want to be reallyaggressive, you want to sort of
keep it.
You don't want to be reallyaggressive, you want to sort of
keep it, you don't want to getreal personal about it.
But if you think thatsomebody's in a transaction
where they're doing somethingthat you think is contrary to
(12:49):
the terms that you agreed on, orsomething to that effect you
see a lot in construction rightwhen someone's schedule's
slipping or something like thatyou know as an owner in that
case you want to put them onnotice early that you're aware
of this and they need to get itback on track.
Or else you're going to takesome action.
(13:10):
And the reason you want to dothat is twofold.
One is there's this concept ofwaiver in law where if you don't
object to something, you can bedeemed to have waived any
objection to that.
Speaker 1 (13:26):
And your rights to remedy potentially.
Speaker 2 (13:27):
Right.
Exactly.
A lot of times you'll see thiscome up in notices.
If you don't contract, you'llsee this quite often.
You have to provide notice, andI use the construction example
again If something occursschedule slips or something like
that, you have to providenotice that it slipped within 10
(13:49):
days, say.
If you don't provide thatnotice, you may have waived your
right to object to thatschedule slippage.
So that's one is you don't wantto waive your rights to be able
to do that.
The second is there's elementsof equity and fairness that sort
(14:11):
of underlie the law.
You don't want to end up in ascenario where you're in court
saying, yeah, you know what thishappened and that happened, and
the other party is saying younever told me.
That doesn't play well with ajudge or jury by any stretch of
the imagination.
Speaker 1 (14:28):
Well, and in certain situations there are time
restrictions in the law on someof those things.
I mean, I know another.
You know you give theconstruction example in our
business, right?
If I have a client that bouncestheir payroll, they owe me,
I've paid their employees, I'vepaid their taxes.
Now I'm on the hook for allthat.
You know we issue a demandletter pretty quick, right.
99.9% of the time it's gosh.
I forgot to transfer money.
(14:49):
Take it the next day, it's fine.
You know that, doesn't it'searlier than that.
Speaker 2 (15:03):
Sure yeah, Because I want to get paid too.
Speaker 1 (15:07):
It's saying this is a violation of our agreement in
this context, and we will useour agreement if we have to our
personal guarantee, ourcorporate guarantee, all those
kind of things to collect on you.
It's not going to be cheap foryou either.
So, you know, I think that's ait's a really important thing to
make sure that you're havingthose conversations.
Speaker 2 (15:26):
Right, and are you and this is a question for you
and just practice are youcalling the client ahead of time
?
Cause that's the other thing Iwanted to point out Are you kind
of giving them the heads up orare you just sending that?
Speaker 1 (15:36):
Well, no, we will have tried multiple ways to
communicate with them.
And if they're notcommunicating with us, if
they're not making arrangements,if they're ghosting us, if
they're giving us lip service,it's not like we didn't try to
talk to you first.
I mean again.
99.9% of the time it's gosh Iforgot to transfer money, or the
deposit didn't hit, or whatever.
Next day it's taken care ofright.
(15:56):
But you know there are time wehave had.
I've only had to do it onceright.
Fortunately, in my career wherewe've had to, you know, go into
some sort of formal you knowlitigation against a client,
because they, you know theyended up going bankrupt and
fortunately they sold.
We leaned the property and whenthey sold we got our check.
It took me three years to getit but we got it.
Speaker 2 (16:20):
But again we had to go through that process to
manage that?
Yeah, and I think you can'tunderscore how important it is
to pick up the phone when thingsstart to go south or you take
objection to something that'sgoing on.
The documentation is important.
It's important to send thatemail or maybe a bit more formal
of a letter, but it's alsoimportant to pick up the phone
(16:44):
and, at a minimum, tell themit's coming, you don't?
There's no faster way todegrade a relationship than to
just blindly start firingletters and notices out.
Speaker 1 (16:54):
We still want to be a decent human being.
Speaker 2 (16:56):
Right, exactly, Right , Exactly.
Hiring letters and notices.
We still want to be a decenthuman being.
Right, exactly Exactly.
And you know, like I said, thekind of the documentation piece
of it.
It doesn't need to be fancy, itcan be an email, it can be as
simple as you know, like hey, wejust talked on the phone.
You know, just memorializingthat I, you know, I noticed this
is happening, let's get it.
You know, get it back on trackkind of thing.
(17:20):
And if it, if it kind ofcontinues, then you can sort of
bring in the lawyer letters andthat sort of thing.
But once I will say that, onceyou have turned to the lawyer
letters, things are usually it'stough to kind of reel that back
.
Speaker 1 (17:29):
Oh yeah, you've got to, you've, you've started that
process and you have to kind ofgo down that road.
Speaker 2 (17:32):
Yeah, exactly, all right, we've gone through 123.
What's?
Speaker 1 (17:34):
number four Exactly, all right, we've gone through
one, two, three.
What's number four?
Speaker 2 (17:37):
One, two, three, number four, I'm going to say,
being measured in your responseto customer complaints.
I think that is somewhere whereI see clients often kind of
going awry and they can come insort of two forms.
One is just the complaint thatcomes directly to you.
The other are reviews andcomplaints that are posted on
(18:00):
social media and I think it'simportant in either of those to
well, I'll say this In theprivate correspondence you can
be a bit more aggressive and bemore aggressive in your position
in pointing out why you knowthey're basically wrong or why
you're right.
(18:20):
You usually want to avoidtotally admitting you're at
fault.
If you are at fault, it justmakes it a little bit harder to
argue with away later on.
But the more challenging one isGoogle reviews, I find.
But the more challenging one isGoogle reviews, I find I talk
(18:43):
to a lot of clients about.
You know, call up and they'vegot this bad Google review,
because Google reviews are thelifeblood of so many
organizations out there, right,and it can be so tempting to
really lay out your story onsocial media in response to the
customer review, your story onsocial media in response to the
customer review, and I alwayssay it's so important to not do
that, to just take as measuredof an approach as possible, for
(19:08):
a couple reasons.
One, you're never going toconvince that person that left a
bad Google review.
You're never going to win thatargument, so don't even try.
Two, you don't want to sayanything that can basically be
used against you later on.
You don't want to wade intothese like waters of defamation,
(19:31):
slander or anything like that.
Just stay far away from that.
And three, I personally as justthis is with my consumer hat on
I usually view those, I takethose negative reviews with a
grain of salt.
I agree.
Speaker 1 (19:47):
I think exactly right From a consumer perspective,
from a customer serviceperspective.
I always tell people respond.
You have the ability to respond.
You say thank you so much foryour feedback.
It's been a great learningopportunity for us.
If we can be of furtherassistance to you or you want to
come back into our restaurant,you're always welcome.
Whatever right into ourrestaurant, you're always
welcome, whatever right.
Yeah, you know, and frankly, ifpeople the people are reading
(20:07):
those Google reviews, in myopinion that aren't going to
frequent your establishment oruse you as a service provider
probably don't want them anyway.
Yeah, if they're going to takethose negative reviews as if
there's 500 positive reviews andone negative review and
someone's gonna say I don't wantto deal with paper trails
because they have one bad review, yep, someone's going to say I
don't want to deal with papertrails because they have one bad
(20:27):
review and it's probablybecause they acted like a
knucklehead and we fired them.
Probably that's why it might bethere and I don't want that
client anyway.
Speaker 2 (20:33):
I don't want that customer anyway.
That's what I tell people, yeah, and I totally agree.
And on the privatecommunication, I find you're
often helping people actuallypush back on complaints.
There's obviously in a lot, youknow, really, I mean across the
board in all businesses,there's this you know, customer
(20:53):
is always right mindset and yousometimes you lose this focus of
actually standing up foryourself.
You know there are a lot ofcrazy people out there who, as
much as you want to sort ofassume everybody has the best of
intentions, there are a lot ofmanipulative people out there
who, as much as you want to sortof assume everybody has the
best of intentions, there are alot of manipulative people out
there that will just drum upstuff because that's their mode
(21:14):
of operating.
They just think they can alwayspush people around and so it's
important to push back sometimes.
I mean it's always a businessrisk, right, you gotta weigh the
the risks of doing it, but youcan't get yourself, you can't
let yourself get walked all over, which a lot of people are out
there trying to do.
Speaker 1 (21:34):
It's funny we have.
We have a couple of clientsthat I can think of that I don't
want to call them bullies, butthey're just very strong
personalities and I have oneemployee who's really great at
dealing with that type of personand that she can say no, I'm
not going to do that, no, we arenot doing that for you.
You need to do this, and theyrespect her more for that.
(21:55):
And where that client has walkedall over other members of our
team and it doesn't have to cometo me, but we have boundaries
now.
We don't deal with people likethat.
Speaker 2 (22:05):
So if you can't get your, you know your stuff in
check, you know that's that's onyou, yeah, so if you take
anything from this, it's it'spermission to push back a little
bit to stand up for yourself,absolutely, you know and it's
funny we had.
Speaker 1 (22:18):
I did an episode with Chris Fortin a while back and
he's new.
He's young, he started hisbusiness in high school.
He's growing it and he's likethe customer's always right.
He said you're going to learnin the maturity of your business
career that that's not alwaystrue.
And that's OK, that's OK.
Speaker 2 (22:34):
That's business.
That's business right.
Speaker 1 (22:41):
But don't get yourself in a situation, I think
what your point is.
Speaker 2 (22:43):
Don exactly, yeah, and sometimes you just got to
kind of take a loss, right.
Sometimes, it's not worthfighting.
It's just, you know you're inthe right, but you're just going
to agree to make it go away.
Speaker 1 (22:55):
And those are the hardest decisions to make,
because you just want to fight.
Yep exactly, I've been there.
Yep, yep exactly, All right.
Speaker 2 (23:02):
Number five, last but not least, yeah this one holds
a special place in my heart andthat's going to be succession
planning.
And then I would saypartnership relations get
grouped into that one.
And the pitfall here is onsuccession planning, is that it
just always takes longer thanyou think without fail.
You know you see people come.
(23:25):
I'll see people come to me.
You know they want totransition the business to the
next generation.
They'll come in may and theywant it done by july 1 or
something like that and likesure it can be done.
It.
It's going to be a pretty roughride and you're going to it's
not going to be done.
You know well I shouldn't sayit's not going to be done.
You know well I shouldn't saythat it's going to be done.
(23:47):
But you're going to kind ofcompromise in a few different
areas and there's always thingsthat you aren't anticipating
that will take longer.
The biggest one is like banks.
You know if there's debt on thebusiness, you're going to have
to work with the banks.
It's going to take quite awhile.
I usually say a year at aminimum is a pretty good time.
The business you're going tohave to work with the banks.
It's going to take quite awhile.
I usually say, a year at aminimum is a pretty good time,
(24:11):
that's if you're keeping it in afamily right.
That's, I would say, areasonably comfortable timeline
to actually pull it all togetherand I can attest to that right.
Speaker 1 (24:21):
I mean, I bought this business from my aunt when she
retired and we started inJanuary and I was in the
business already.
I was already a shareholder, Ihad equity, I was running the
business, she was retiring, Ihad to buy her equity out and we
started in January of 2019.
And I was telling Pat earlier,the attorneys were still arguing
January 20th of 2020, over ayear later, and finally we had
(24:44):
to say, ok enough, we don't carewhere the semicolon is.
Speaker 2 (24:47):
Let's just sign.
Speaker 1 (24:49):
And you know that Pat was not in that transaction.
So, you know, but it definitelytakes a long time.
That was totally amicable,right, like we had given the
attorneys the deal sheet.
So this is what we're going topay.
Here's the value, here's thisassets, and it was like should
have been a really easy deal.
And there, and it was likeshould have been a really easy
(25:09):
deal and there was no.
You know, of course, everyonehad to protect each other, but,
uh, you know, it was not.
It was it was civil.
Speaker 2 (25:12):
Just yeah, it just takes, take, take, take time.
You know um and and, and youknow you got to be thinking
about that even long.
You know further ahead, ifyou're going to sell to a third
party, if that's, if that's theexit.
Because for a few differentreasons.
One, you want to be going intothat sale firing on all
cylinders.
You don't want, and so thatmeans really ramping up and
(25:35):
optimizing performance of thecompany.
You know, two, three yearsbefore the sale, you don't want
to limp into a sale transactionwhere a buyer is looking at
financials.
That you know that show thatyou really took your foot off
the gas.
They want to see this thingfiring on all cylinders.
Speaker 1 (25:52):
Well, particularly if you're in that.
You know, I just read a book.
I can't remember the name of it.
It made that much of an impacton me, obviously.
Speaker 2 (25:57):
But it was about that .
Speaker 1 (25:58):
It was like literally optimizing your business,
getting it ready for a buyer.
That you know one.
Financials need to be healthy,operations need to be healthy,
the corporate book needs to behealthy.
You know.
Make sure you have your stufftogether before you, because the
valuation is going to go downand it's going to be harder to
find a buyer if you don't havethat stuff put together.
Speaker 2 (26:14):
Right, exactly, so you know.
So it takes time to ramp thatup, get that all in order.
And two, I mean not every salegoes through.
You know you don't want to be,and they take a while too,
especially if there's financinginvolved.
You know they could.
Six months is a from signing anLOI, you know, all the way to
closing.
I mean six months is actually arelatively.
(26:36):
I mean that's an average, Iwould say, time frame.
It can be.
It can certainly take longerand they don't all go through.
So you don't want to plan onretiring at 65.
Halfway through 65, the dealfalls through and now you're
kind of back to square one.
You got to kind of plan forthat and it can take a while.
Speaker 1 (26:56):
What about the partner relations piece?
What headaches are there?
Speaker 2 (26:59):
Yeah, and I think the pitfall there is and you hear
it all the time but it's simplyyou.
You know when, in yourhoneymoon phase, make sure you
get your agreement in writingbetween you two and it's the use
, a robust agreement.
Um, it's in that period of timewhen you're starting out it's
(27:20):
exciting, everything's goinggreat.
You're going to look at thisagreement, this 20-page
operating agreement, theoperating agreement in LLC is
the agreement that sort of ishow you're going to run the
company between you and yourpartners.
It's going to seem like it goesinto these details that are are
not applicable Levels ofauthority.
(27:41):
You're going to look at it andsay we'll just always agree.
What do we need these levels ofauthority for?
It's going to talk about,potentially, what happens if one
partner wants to sell out.
What happens there, whathappens if somebody dies Not
terribly fun details.
But you will be shocked at howpeople act, how different people
(28:01):
act when there's no money inthe bank account and when
there's a lot of money in thebank account or when there's a
lot of money on the table.
There's simply no way to predicthow someone you think you know
so well is going to act in thosescenarios, and an agreement is
always.
It's simply the baseline.
You can always agree to changeit later on.
(28:24):
If it says one thing and theparty's in agreement 10, 15, 20
years down the road to dosomething different, that's fine
, just agree.
Speaker 1 (28:32):
Just write new agreements.
Speaker 2 (28:33):
Exactly, but at a minimum at least you have a
baseline so that if you can'treach agreement, you have
something to fall back on.
And the risk of not getting itis to kind of go back to that
first contract piece or secondpiece is that if you don't have
anything in writing, then thelaw whatever the law is on that
topic is simply going to apply,and again you just lose control
(28:58):
of that process.
Do you want, if somebody, ifyour partner, passes away?
Do you want to be in businesswith their spouse?
That's probably, you know,maybe you do, but you probably
want to be a little bit morethoughtful about that, you know.
Do you want the opportunity tobuy that partner out?
Yeah, probably, but if youdon't have, that writing.
Speaker 1 (29:18):
I mean it's basic stuff, I mean just like that,
right, I mean, hey, theassumption is if something
happens to one of us, sure youare the first buyer, you.
The assumption is if somethinghappens to one of us, sure you
are the first buyer.
You have the right of firstrefusal to buy the spouse or the
survivors out right, Right, yep.
Speaker 2 (29:30):
And the law doesn't give you that right.
Speaker 1 (29:32):
Right because the estate would still own the
equity.
It's not, you know.
Then you've got to fight withthe estate.
Speaker 2 (29:37):
Who knows what that could look like right Kids end
up with it.
Right, exactly, exactly.
Sounds like a headache.
Yeah yeah, been there and kindof along that line dealing sort
of making clean partnershipexits as well, making sure if
the relationship does, you know,say you follow all the rules
(29:59):
and the part you just decide togo your separate ways or one
person decides to exit thecompany, make sure you actually
document it.
And that's probably worthconsulting an attorney to make
sure you're documenting it well.
What you really don't want isto end up in a scenario five, 10
years down the road whereyou're in a sale transaction and
, lo and behold, you find outthat that guy or girl is
(30:19):
actually still an owner.
That's not a good scenario.
Speaker 1 (30:25):
Get the stock certificates back.
Speaker 2 (30:26):
Yeah, exactly, exactly.
Speaker 1 (30:28):
Awesome, all right.
Well, these are really goodlegal landmines to avoid.
So if folks have stepped onthese landmines and lost a limb,
how do they get in touch withyou to fix them?
Speaker 2 (30:37):
Yeah, definitely, Probably the website's the
easiest.
Bergenparkinsoncom.
My email is pbrady atbergenparkinsoncom.
Awesome, Great, great great.
Speaker 1 (30:45):
Well, thank you very much for listening.
I hope this was a good one.
I hope that you have notstepped on any legal landmines
(31:15):
lately and you are intact, sothat's wonderful.
But thanks, pat, thankseverybody for listening and
we'll see you all next week.
Thanks for having me, chris.
Thanks for listening to thisweek's episode of A Small
Business.
Thank you purposes only andshould not be considered legal
or financial advice.
By inviting this guest to ourpodcast, paper Curls does not
imply endorsement of oropposition to any specific
individual, organization,product or service.
This is Small Business Big World, our weekly
podcast prepared by the team atPaper Trails.
Owning and running a smallbusiness is hard.
Each week, we'll dive into thechallenges, headaches, trends,
fun and excitement of running asmall business.
After all, small businesses arethe heartbeat of America and
our team is here to keep thembeating.
Welcome to Small Business BigWorld, our weekly podcast, where
(00:22):
we talk about all the fun andmiserable and exciting things
about running a small business,and this is one of those
miserable things about running asmall business.
It's kind of the top five legallandmines that small businesses
face on a daily basis.
So my guest, pat Brady,attorney extraordinaire here
from Bergen and Parkinson,welcome back.
Speaker 2 (00:41):
Yeah, thanks for having me, Chris.
Of course, good to be backSecond time around.
I know this.
Speaker 1 (00:44):
Welcome back.
Yeah, thanks for having me,chris.
Of course, good to be backsecond time around.
I know this will be a good onetoo.
I think we all worry aboutselling things and managing our
employees and keeping the lightson, but we sometimes don't
think about the paperwork andthe legal things that small
businesses do run into.
Speaker 2 (00:57):
So this will be a good one.
Speaker 1 (01:02):
So before we jump into it, don't forget like,
follow, share rate, review,subscribe.
We are on Instagram, facebook,spotify, tiktok, apple Podcasts,
anywhere you want to.
You know, if you're bored atnight scrolling, we're probably
there, so you know, check it outCertainly.
If you have any questions aboutanything we talk about today or
any of our episodes, feel freeto email us podcast at
papertrailscom and we will getyou in touch or get an answer
for you.
So thank you.
All right, let's start withnumber one legal landmine.
(01:25):
See if we can't lose a limbhere.
What do you think?
What do you think it's going tobe?
Speaker 2 (01:30):
Yeah, so I'm gonna, I'm gonna go number one
corporate housekeeping andrecord keeping.
Speaker 1 (01:34):
All right, so really exciting really exciting stuff.
Speaker 2 (01:37):
The stuff that just no one wants to do always seems
to fall by the wayside.
But you know can just show up.
You know, the lack of recordkeeping and good corporate
hygiene can just show up in amultitude of different ways.
Speaker 1 (01:50):
So what does that mean, right?
So what you're saying?
We all know we have to havefiles and records and things
like that.
What do you think smallbusiness should have, should be
keeping for good records and soforth in their corporate
structure?
Speaker 2 (02:00):
Absolutely so.
Of course there's always theaccounting records, right, and
we don't get.
I mean that those are important.
Those are not my.
You know, within my wheelhouseI know the importance of keeping
good tax records and all thatstuff.
But I'm more focused on thingslike your, your governing
documents, those documents thatyou file with the Secretary of
State making sure you keep yourannual reporting requirements up
(02:22):
.
And then the the documentsbelow that, like your bylaws,
your operating agreements, thatsort of stuff, making sure
you've actually got them one,making sure they're up to date,
they're actually reflecting thepractices of the organization,
how the organization's managed,how it's operated.
And then the ones that you seemissed most often are consent
(02:42):
resolutions.
Consent resolutions are goingto be votes that you actually
just take down on paper or youcan have minutes as well.
You really need to document thebig decisions of the
organization.
There's a couple of reasons forthat.
One is liability protection.
As a lot of people will know,when you have an entity, a
corporation, llc, whatever youhave you have liability
(03:07):
protection as an owner.
So sort of the things thathappen within that box are
isolated to that box and intheory they don't flow up to the
owners.
You can lose that liabilityprotection when you don't
observe the fact that it is itsown separate, distinct box.
And one of the ways youevidence that it is its own
living, breathing thing iskeeping good records.
If you're just sort of outthere helter skelter doing
(03:29):
whatever you want, not sort ofholding votes, observing what
your governing documents say,you could be exposed there to
some claim that you didn'tobserve the formalities of the
corporation so you're liable.
Speaker 1 (03:43):
So that's keeping the corporate book right.
That's the term for it.
Right, exactly.
And I think I've been to anattorney's office where they
have literally binders on theshelf for every business that
they work with.
Right, does that exist anymore?
Is everything digital?
Speaker 2 (03:55):
It does, it does yeah , and there is a start of a push
to move towards digital books,but most people still keep a
hard copy and within that you'vegot your document that gets
filed with the Secretary ofState, your articles, your
certificate of formation, you'vegot your operating agreement or
your bylaws, and then that'swhere you put your consent
(04:16):
resolutions as well.
Speaker 1 (04:17):
And with that, so are there things these days that we
still need to have a wetsignature on.
They need to be originals.
Great question, Because for me,I know the name of my business
is Paper Trails, but I don'thave a file cabinet anywhere in
this office.
It's a great question.
Speaker 2 (04:32):
And so there are two things that require wet
signatures still.
Those are things that are goingto be recorded in the registry
of deeds.
So you're talking deeds,mortgages, that sort of thing.
Those have to be wet signature.
And the second is anythinggoing to the Secretary of State.
The Secretary of State in Mainestill requires wet signatures.
(04:52):
Maine is an outlier in thatregard.
Speaker 1 (04:58):
Most Secretary of States are moving towards
accepting digital signatures.
Once you get it back, scan it,save it, you're good right?
Speaker 2 (05:01):
Yeah, exactly, you should keep the original deeds,
but the Secretary of Statedocuments.
Yeah, you can generally get ridof them.
Speaker 1 (05:10):
So anything that's recorded in the registry, one or
one signature physicallysomewhere, Yep, and then hang on
to that one Somewhere right,yep, and yeah, go ahead, and I
was going to say that's what wehave attorneys like you for
right.
Most attorneys if you, if youhave an agent of record, you're
usually keeping thatquote-unquote book right.
Yep exactly, so that'scertainly a helpful thing.
Speaker 2 (05:27):
Yep and the lack of record-keeping.
There's the liability piece andit shows up in financing
transactions.
Banks are going to want to seethose documents to see that
you're actually keeping those,maintaining those, and you don't
really want to be on the eve ofclosing scramble and running
around trying to piece it alltogether, exit transactions.
You know you don't want to bethat seller, that a buyer comes
(05:48):
in and asks to see yourcorporate records and you have
nothing to show them.
They're going to say you know,what were you doing all these
years?
How many skeletons are outthere, you know.
So it can show up in amultitude of different ways.
Okay.
Speaker 1 (06:03):
Well, good record keeping, housekeeping and the
corporate book, that's important.
That's number one, AbsolutelyNumber two.
Where are we going?
Speaker 2 (06:09):
number two yeah, contracts, I think contracts, or
maybe more particularly thelack thereof.
It always shocks me howcontracts are always.
It seems like such anafterthought in so many
instances, and the biggestreason, the biggest pitfall of
(06:29):
not having a contract isobviously trying to prove what
the deal is when things go south.
You know, did the parties agreeon this?
What were the fine points ofthe agreement?
That's one of the big issues.
The other big issue is that ifyou don't have a contract one,
there's a question of do youhave an enforceable deal?
(06:49):
That's one issue that you runinto, but the second is you're
left with whatever the law isgoing to apply to your deal.
So, for example, say there's adispute within this deal that
you apparently reached, you'regoing to go to litigation,
you're going to go to court tosettle that, whereas if you had
(07:11):
a contract, you could haveagreed in that contract to first
mediate things, keep it out ofthe court system and if
mediation wasn't successful, goto arbitration.
You don't get that.
If you don't have a contract,you don't have any of that.
You basically lose control of alot of different things.
You're subject to whateverwarranties the sort of general
(07:31):
body of law applies to yourcontracts.
So you're really just you'rejust sort of left out in the
wind when you don't have one.
Speaker 1 (07:39):
So I know, as a small business owner, I am presented
with an agreement or contract.
Often, for whatever service I'mgoing into, right, I'm going to
get something and I do with myclients, right?
I mean, we have our standardagreement that we work with
clients and, for the first timein a very long time, one of our
new clients is sending ouragreement to their attorney
before you know, and I know ourattorney drafted that and I know
(08:02):
it protects me and of coursethey're going to look to see
what protects them, of course.
Speaker 2 (08:05):
Yep.
Speaker 1 (08:05):
You know what, how often should business owners be
sending those day-to-daycontracts off to be looked at,
right, I mean sure, cause wealways say gosh, it's going to
cost me 500 bucks to send thisto, you know, to Pat, and he's
going to look at it and he'sgoing to right, yeah, that's a
really hard question and itreally comes down to what the
(08:27):
risk exposure is on the contract.
Speaker 2 (08:29):
I think If it's a contract to buy $100 worth of
widgets, if things go terriblywrong, you know it's probably
you think of the worst case thatwere to happen under that
contract.
If you sign it, if the worstcase is something you can sleep
at night with, then probablyfine.
But if it's anything more thanthat, it's going to keep you up
(08:50):
at night.
Speaker 1 (08:51):
If things go south it's definitely probably having
a second set of eyes, it's amajor vendor or a major
expenditure to your business.
Speaker 2 (08:57):
those types of things Exactly and the thing that you
can talk with your attorneyabout is sort of almost having
them educate you on what to lookfor.
You always want to be certainlythe business terms right.
I mean the business owner isgoing to be in charge of that
prices, quantities, time ofperformance, schedule, all that
sort of stuff.
But they can help youunderstand what things like
(09:19):
indemnities, what things likewarranties look like and what
they are, and so you can sort ofstart to spot check things.
And if it looks, you know, Imean you know you use your
judgment and your comfort level,but you can start as you get,
as you work with them, moreyou'll start to pick up on.
You know that doesn't lookquite right.
I don't feel comfortable withthat.
(09:40):
I'll send that one along versus.
You know I'm comfortable, Irecognize what that is.
Speaker 1 (09:44):
What about in more transactional businesses, Like
you're a retailer or arestaurant or I mean?
Certainly we deal with money,right, we move money around.
So it's important that we havea contract, yep, but you know
there's basic law that says if Ibuy something from you, there's
a quote unquote contract rightRight.
Yep, explain that.
What's that?
Speaker 2 (10:01):
Yeah, yeah.
So I mean you can.
A contract can take many forms.
A contract can be a handshakedeal.
I mean, you know, there's thislaw school example of when you
go to the counter and order asandwich.
You've just entered into acontract with the restaurant.
You've agreed to pay thisamount of money in exchange for
a sandwich.
That's contract, right there.
There's rules as to when thingshave to be in writing.
(10:25):
It's called the statute offrauds.
It's like real estatetransactions have to be in
writing.
Over a certain dollar amounthave to be in writing.
Time of performance, thesesorts of things have to be in
writing.
But generally, yeah, and youcan enter into a contract
unknowingly too.
There's case law out there thatsays that you send an email
(10:45):
with a signature, your signatureline can constitute your
signature to an agreement.
So the point is, yeah, you canenter into contracts in a
variety of different ways andthey don't have to be your
conventional, you know, writtendoc.
Speaker 1 (10:59):
Well, maybe now these days, with all the crazy people
suing everybody, maybe we wantto have a contract for selling
that hamburger, right?
If you get sick, we're notliable.
If you, you know you can't puta bad Google review on us.
You can't do.
You know all those things right.
Because customer service isbecoming more and more crazy.
Speaker 2 (11:14):
Yeah, and to circle back to the first one, you know
if you are going to do acontract it sounds so simple,
but make sure you actually getan executed copy of it.
And this shows up all the timein sale transactions, where a
buyer will come in and ask tosee all your contracts and you
either A can't produce thecontract.
(11:34):
You know one exists but youcan't produce the contract.
You know one exists but youcan't produce it because either
it was just like saved an emailand lost, or you just never
saved it.
Or if you can find a copy, it'sit's only like partially
executed.
You know like you signed it andyou sent it back for signature
but you never got the signedcopy back.
So it's not glamorous, but it'simportant to stay.
(11:55):
You know, stay on those sortsof things and make sure you
actually get the signed copyback.
So it's not glamorous, but it'simportant to stay.
You know, stay on those sortsof things and make sure you
actually get the signed contractback and good record keeping.
Speaker 1 (12:02):
Exactly Back to number one Yep, exactly.
All right, let's go to numberthree.
What's number three?
Speaker 2 (12:06):
Yeah, and this is more of a kind of amorphous
concept, but it's the importanceof kind of, when things start
to go south, make sure you getyour position out early and put
people on notice that you takeobjection to what is going on.
Speaker 1 (12:28):
In writing.
Speaker 2 (12:28):
In writing.
Yes, oh yes, absolutely.
And it doesn't need to be fancy, it can be an email and there's
an art to it.
You don't want to be reallyaggressive, you want to sort of
keep it.
You don't want to be reallyaggressive, you want to sort of
keep it, you don't want to getreal personal about it.
But if you think thatsomebody's in a transaction
where they're doing somethingthat you think is contrary to
(12:49):
the terms that you agreed on, orsomething to that effect you
see a lot in construction rightwhen someone's schedule's
slipping or something like thatyou know as an owner in that
case you want to put them onnotice early that you're aware
of this and they need to get itback on track.
Or else you're going to takesome action.
(13:10):
And the reason you want to dothat is twofold.
One is there's this concept ofwaiver in law where if you don't
object to something, you can bedeemed to have waived any
objection to that.
Speaker 1 (13:26):
And your rights to remedy potentially.
Speaker 2 (13:27):
Right.
Exactly.
A lot of times you'll see thiscome up in notices.
If you don't contract, you'llsee this quite often.
You have to provide notice, andI use the construction example
again If something occursschedule slips or something like
that, you have to providenotice that it slipped within 10
(13:49):
days, say.
If you don't provide thatnotice, you may have waived your
right to object to thatschedule slippage.
So that's one is you don't wantto waive your rights to be able
to do that.
The second is there's elementsof equity and fairness that sort
(14:11):
of underlie the law.
You don't want to end up in ascenario where you're in court
saying, yeah, you know what thishappened and that happened, and
the other party is saying younever told me.
That doesn't play well with ajudge or jury by any stretch of
the imagination.
Speaker 1 (14:28):
Well, and in certain situations there are time
restrictions in the law on someof those things.
I mean, I know another.
You know you give theconstruction example in our
business, right?
If I have a client that bouncestheir payroll, they owe me,
I've paid their employees, I'vepaid their taxes.
Now I'm on the hook for allthat.
You know we issue a demandletter pretty quick, right.
99.9% of the time it's gosh.
I forgot to transfer money.
(14:49):
Take it the next day, it's fine.
You know that, doesn't it'searlier than that.
Speaker 2 (15:03):
Sure yeah, Because I want to get paid too.
Speaker 1 (15:07):
It's saying this is a violation of our agreement in
this context, and we will useour agreement if we have to our
personal guarantee, ourcorporate guarantee, all those
kind of things to collect on you.
It's not going to be cheap foryou either.
So, you know, I think that's ait's a really important thing to
make sure that you're havingthose conversations.
Speaker 2 (15:26):
Right, and are you and this is a question for you
and just practice are youcalling the client ahead of time
?
Cause that's the other thing Iwanted to point out Are you kind
of giving them the heads up orare you just sending that?
Speaker 1 (15:36):
Well, no, we will have tried multiple ways to
communicate with them.
And if they're notcommunicating with us, if
they're not making arrangements,if they're ghosting us, if
they're giving us lip service,it's not like we didn't try to
talk to you first.
I mean again.
99.9% of the time it's gosh Iforgot to transfer money, or the
deposit didn't hit, or whatever.
Next day it's taken care ofright.
(15:56):
But you know there are time wehave had.
I've only had to do it onceright.
Fortunately, in my career wherewe've had to, you know, go into
some sort of formal you knowlitigation against a client,
because they, you know theyended up going bankrupt and
fortunately they sold.
We leaned the property and whenthey sold we got our check.
It took me three years to getit but we got it.
Speaker 2 (16:20):
But again we had to go through that process to
manage that?
Yeah, and I think you can'tunderscore how important it is
to pick up the phone when thingsstart to go south or you take
objection to something that'sgoing on.
The documentation is important.
It's important to send thatemail or maybe a bit more formal
of a letter, but it's alsoimportant to pick up the phone
(16:44):
and, at a minimum, tell themit's coming, you don't?
There's no faster way todegrade a relationship than to
just blindly start firingletters and notices out.
Speaker 1 (16:54):
We still want to be a decent human being.
Speaker 2 (16:56):
Right, exactly, Right , Exactly.
Hiring letters and notices.
We still want to be a decenthuman being.
Right, exactly Exactly.
And you know, like I said, thekind of the documentation piece
of it.
It doesn't need to be fancy, itcan be an email, it can be as
simple as you know, like hey, wejust talked on the phone.
You know, just memorializingthat I, you know, I noticed this
is happening, let's get it.
You know, get it back on trackkind of thing.
(17:20):
And if it, if it kind ofcontinues, then you can sort of
bring in the lawyer letters andthat sort of thing.
But once I will say that, onceyou have turned to the lawyer
letters, things are usually it'stough to kind of reel that back
.
Speaker 1 (17:29):
Oh yeah, you've got to, you've, you've started that
process and you have to kind ofgo down that road.
Speaker 2 (17:32):
Yeah, exactly, all right, we've gone through 123.
What's?
Speaker 1 (17:34):
number four Exactly, all right, we've gone through
one, two, three.
What's number four?
Speaker 2 (17:37):
One, two, three, number four, I'm going to say,
being measured in your responseto customer complaints.
I think that is somewhere whereI see clients often kind of
going awry and they can come insort of two forms.
One is just the complaint thatcomes directly to you.
The other are reviews andcomplaints that are posted on
(18:00):
social media and I think it'simportant in either of those to
well, I'll say this In theprivate correspondence you can
be a bit more aggressive and bemore aggressive in your position
in pointing out why you knowthey're basically wrong or why
you're right.
(18:20):
You usually want to avoidtotally admitting you're at
fault.
If you are at fault, it justmakes it a little bit harder to
argue with away later on.
But the more challenging one isGoogle reviews, I find.
But the more challenging one isGoogle reviews, I find I talk
(18:43):
to a lot of clients about.
You know, call up and they'vegot this bad Google review,
because Google reviews are thelifeblood of so many
organizations out there, right,and it can be so tempting to
really lay out your story onsocial media in response to the
customer review, your story onsocial media in response to the
customer review, and I alwayssay it's so important to not do
that, to just take as measuredof an approach as possible, for
(19:08):
a couple reasons.
One, you're never going toconvince that person that left a
bad Google review.
You're never going to win thatargument, so don't even try.
Two, you don't want to sayanything that can basically be
used against you later on.
You don't want to wade intothese like waters of defamation,
(19:31):
slander or anything like that.
Just stay far away from that.
And three, I personally as justthis is with my consumer hat on
I usually view those, I takethose negative reviews with a
grain of salt.
I agree.
Speaker 1 (19:47):
I think exactly right From a consumer perspective,
from a customer serviceperspective.
I always tell people respond.
You have the ability to respond.
You say thank you so much foryour feedback.
It's been a great learningopportunity for us.
If we can be of furtherassistance to you or you want to
come back into our restaurant,you're always welcome.
Whatever right into ourrestaurant, you're always
welcome, whatever right.
Yeah, you know, and frankly, ifpeople the people are reading
(20:07):
those Google reviews, in myopinion that aren't going to
frequent your establishment oruse you as a service provider
probably don't want them anyway.
Yeah, if they're going to takethose negative reviews as if
there's 500 positive reviews andone negative review and
someone's gonna say I don't wantto deal with paper trails
because they have one bad review, yep, someone's going to say I
don't want to deal with papertrails because they have one bad
(20:27):
review and it's probablybecause they acted like a
knucklehead and we fired them.
Probably that's why it might bethere and I don't want that
client anyway.
Speaker 2 (20:33):
I don't want that customer anyway.
That's what I tell people, yeah, and I totally agree.
And on the privatecommunication, I find you're
often helping people actuallypush back on complaints.
There's obviously in a lot, youknow, really, I mean across the
board in all businesses,there's this you know, customer
(20:53):
is always right mindset and yousometimes you lose this focus of
actually standing up foryourself.
You know there are a lot ofcrazy people out there who, as
much as you want to sort ofassume everybody has the best of
intentions, there are a lot ofmanipulative people out there
who, as much as you want to sortof assume everybody has the
best of intentions, there are alot of manipulative people out
there that will just drum upstuff because that's their mode
(21:14):
of operating.
They just think they can alwayspush people around and so it's
important to push back sometimes.
I mean it's always a businessrisk, right, you gotta weigh the
the risks of doing it, but youcan't get yourself, you can't
let yourself get walked all over, which a lot of people are out
there trying to do.
Speaker 1 (21:34):
It's funny we have.
We have a couple of clientsthat I can think of that I don't
want to call them bullies, butthey're just very strong
personalities and I have oneemployee who's really great at
dealing with that type of personand that she can say no, I'm
not going to do that, no, we arenot doing that for you.
You need to do this, and theyrespect her more for that.
(21:55):
And where that client has walkedall over other members of our
team and it doesn't have to cometo me, but we have boundaries
now.
We don't deal with people likethat.
Speaker 2 (22:05):
So if you can't get your, you know your stuff in
check, you know that's that's onyou, yeah, so if you take
anything from this, it's it'spermission to push back a little
bit to stand up for yourself,absolutely, you know and it's
funny we had.
Speaker 1 (22:18):
I did an episode with Chris Fortin a while back and
he's new.
He's young, he started hisbusiness in high school.
He's growing it and he's likethe customer's always right.
He said you're going to learnin the maturity of your business
career that that's not alwaystrue.
And that's OK, that's OK.
Speaker 2 (22:34):
That's business.
That's business right.
Speaker 1 (22:41):
But don't get yourself in a situation, I think
what your point is.
Speaker 2 (22:43):
Don exactly, yeah, and sometimes you just got to
kind of take a loss, right.
Sometimes, it's not worthfighting.
It's just, you know you're inthe right, but you're just going
to agree to make it go away.
Speaker 1 (22:55):
And those are the hardest decisions to make,
because you just want to fight.
Yep exactly, I've been there.
Yep, yep exactly, All right.
Speaker 2 (23:02):
Number five, last but not least, yeah this one holds
a special place in my heart andthat's going to be succession
planning.
And then I would saypartnership relations get
grouped into that one.
And the pitfall here is onsuccession planning, is that it
just always takes longer thanyou think without fail.
You know you see people come.
(23:25):
I'll see people come to me.
You know they want totransition the business to the
next generation.
They'll come in may and theywant it done by july 1 or
something like that and likesure it can be done.
It.
It's going to be a pretty roughride and you're going to it's
not going to be done.
You know well I shouldn't sayit's not going to be done.
You know well I shouldn't saythat it's going to be done.
(23:47):
But you're going to kind ofcompromise in a few different
areas and there's always thingsthat you aren't anticipating
that will take longer.
The biggest one is like banks.
You know if there's debt on thebusiness, you're going to have
to work with the banks.
It's going to take quite awhile.
I usually say a year at aminimum is a pretty good time.
The business you're going tohave to work with the banks.
It's going to take quite awhile.
I usually say, a year at aminimum is a pretty good time,
(24:11):
that's if you're keeping it in afamily right.
That's, I would say, areasonably comfortable timeline
to actually pull it all togetherand I can attest to that right.
Speaker 1 (24:21):
I mean, I bought this business from my aunt when she
retired and we started inJanuary and I was in the
business already.
I was already a shareholder, Ihad equity, I was running the
business, she was retiring, Ihad to buy her equity out and we
started in January of 2019.
And I was telling Pat earlier,the attorneys were still arguing
January 20th of 2020, over ayear later, and finally we had
(24:44):
to say, ok enough, we don't carewhere the semicolon is.
Speaker 2 (24:47):
Let's just sign.
Speaker 1 (24:49):
And you know that Pat was not in that transaction.
So, you know, but it definitelytakes a long time.
That was totally amicable,right, like we had given the
attorneys the deal sheet.
So this is what we're going topay.
Here's the value, here's thisassets, and it was like should
have been a really easy deal.
And there, and it was likeshould have been a really easy
(25:09):
deal and there was no.
You know, of course, everyonehad to protect each other, but,
uh, you know, it was not.
It was it was civil.
Speaker 2 (25:12):
Just yeah, it just takes, take, take, take time.
You know um and and, and youknow you got to be thinking
about that even long.
You know further ahead, ifyou're going to sell to a third
party, if that's, if that's theexit.
Because for a few differentreasons.
One, you want to be going intothat sale firing on all
cylinders.
You don't want, and so thatmeans really ramping up and
(25:35):
optimizing performance of thecompany.
You know, two, three yearsbefore the sale, you don't want
to limp into a sale transactionwhere a buyer is looking at
financials.
That you know that show thatyou really took your foot off
the gas.
They want to see this thingfiring on all cylinders.
Speaker 1 (25:52):
Well, particularly if you're in that.
You know, I just read a book.
I can't remember the name of it.
It made that much of an impacton me, obviously.
Speaker 2 (25:57):
But it was about that .
Speaker 1 (25:58):
It was like literally optimizing your business,
getting it ready for a buyer.
That you know one.
Financials need to be healthy,operations need to be healthy,
the corporate book needs to behealthy.
You know.
Make sure you have your stufftogether before you, because the
valuation is going to go downand it's going to be harder to
find a buyer if you don't havethat stuff put together.
Speaker 2 (26:14):
Right, exactly, so you know.
So it takes time to ramp thatup, get that all in order.
And two, I mean not every salegoes through.
You know you don't want to be,and they take a while too,
especially if there's financinginvolved.
You know they could.
Six months is a from signing anLOI, you know, all the way to
closing.
I mean six months is actually arelatively.
(26:36):
I mean that's an average, Iwould say, time frame.
It can be.
It can certainly take longerand they don't all go through.
So you don't want to plan onretiring at 65.
Halfway through 65, the dealfalls through and now you're
kind of back to square one.
You got to kind of plan forthat and it can take a while.
Speaker 1 (26:56):
What about the partner relations piece?
What headaches are there?
Speaker 2 (26:59):
Yeah, and I think the pitfall there is and you hear
it all the time but it's simplyyou.
You know when, in yourhoneymoon phase, make sure you
get your agreement in writingbetween you two and it's the use
, a robust agreement.
Um, it's in that period of timewhen you're starting out it's
(27:20):
exciting, everything's goinggreat.
You're going to look at thisagreement, this 20-page
operating agreement, theoperating agreement in LLC is
the agreement that sort of ishow you're going to run the
company between you and yourpartners.
It's going to seem like it goesinto these details that are are
not applicable Levels ofauthority.
(27:41):
You're going to look at it andsay we'll just always agree.
What do we need these levels ofauthority for?
It's going to talk about,potentially, what happens if one
partner wants to sell out.
What happens there, whathappens if somebody dies Not
terribly fun details.
But you will be shocked at howpeople act, how different people
(28:01):
act when there's no money inthe bank account and when
there's a lot of money in thebank account or when there's a
lot of money on the table.
There's simply no way to predicthow someone you think you know
so well is going to act in thosescenarios, and an agreement is
always.
It's simply the baseline.
You can always agree to changeit later on.
(28:24):
If it says one thing and theparty's in agreement 10, 15, 20
years down the road to dosomething different, that's fine
, just agree.
Speaker 1 (28:32):
Just write new agreements.
Speaker 2 (28:33):
Exactly, but at a minimum at least you have a
baseline so that if you can'treach agreement, you have
something to fall back on.
And the risk of not getting itis to kind of go back to that
first contract piece or secondpiece is that if you don't have
anything in writing, then thelaw whatever the law is on that
topic is simply going to apply,and again you just lose control
(28:58):
of that process.
Do you want, if somebody, ifyour partner, passes away?
Do you want to be in businesswith their spouse?
That's probably, you know,maybe you do, but you probably
want to be a little bit morethoughtful about that, you know.
Do you want the opportunity tobuy that partner out?
Yeah, probably, but if youdon't have, that writing.
Speaker 1 (29:18):
I mean it's basic stuff, I mean just like that,
right, I mean, hey, theassumption is if something
happens to one of us, sure youare the first buyer, you.
The assumption is if somethinghappens to one of us, sure you
are the first buyer.
You have the right of firstrefusal to buy the spouse or the
survivors out right, Right, yep.
Speaker 2 (29:30):
And the law doesn't give you that right.
Speaker 1 (29:32):
Right because the estate would still own the
equity.
It's not, you know.
Then you've got to fight withthe estate.
Speaker 2 (29:37):
Who knows what that could look like right Kids end
up with it.
Right, exactly, exactly.
Sounds like a headache.
Yeah yeah, been there and kindof along that line dealing sort
of making clean partnershipexits as well, making sure if
the relationship does, you know,say you follow all the rules
(29:59):
and the part you just decide togo your separate ways or one
person decides to exit thecompany, make sure you actually
document it.
And that's probably worthconsulting an attorney to make
sure you're documenting it well.
What you really don't want isto end up in a scenario five, 10
years down the road whereyou're in a sale transaction and
, lo and behold, you find outthat that guy or girl is
(30:19):
actually still an owner.
That's not a good scenario.
Speaker 1 (30:25):
Get the stock certificates back.
Speaker 2 (30:26):
Yeah, exactly, exactly.
Speaker 1 (30:28):
Awesome, all right.
Well, these are really goodlegal landmines to avoid.
So if folks have stepped onthese landmines and lost a limb,
how do they get in touch withyou to fix them?
Speaker 2 (30:37):
Yeah, definitely, Probably the website's the
easiest.
Bergenparkinsoncom.
My email is pbrady atbergenparkinsoncom.
Awesome, Great, great great.
Speaker 1 (30:45):
Well, thank you very much for listening.
I hope this was a good one.
I hope that you have notstepped on any legal landmines
(31:15):
lately and you are intact, sothat's wonderful.
But thanks, pat, thankseverybody for listening and
we'll see you all next week.
Thanks for having me, chris.
Thanks for listening to thisweek's episode of A Small
Business.
Thank you purposes only andshould not be considered legal
or financial advice.
By inviting this guest to ourpodcast, paper Curls does not
imply endorsement of oropposition to any specific
individual, organization,product or service.
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