Five Inexpensive Ways Your Attorney Can Save Your Business Money in Maryland, Virginia, and Washington, DC
Your mom always used to say that “an ounce of prevention is worth a pound of cure.” When it comes to your business, no truer words have ever been spoken. Given the many and relatively easy ways entrepreneurs can insulate themselves from liability, it is truly shocking how few businesses actually take mom’s words to heart.
Below, we offer a list of rather painless legal steps you can take to shore up your Maryland, Virginia, and DC company’s legal holes and make mom proud in the process:
- Addressing corporate “formalities.” In order to maintain the personal limited liability afforded by the corporate form, Maryland, Virginia, and DC require corporations to prepare annual minutes– i.e., a summary of the major decisions the business has made over the past year, approved by the individuals empowered to make such decisions on behalf of the company. Failure to perform corporate formalities in Maryland, Virginia, and DC can eliminate the limited liability protection afforded. In practical terms this means that your personal assets (think: your house, your personal bank accounts, your car) may be exposed to business creditors who may try to sue you personally. Preparing annual minutes costs relatively little, and can save you from a world of hurt.
- Review old business partnership agreements. Your partnership agreement (or your shareholders’ agreement or operating agreement for corporations and limited liability companies, respectively) was created to be a living document. It wasn’t meant to sit on the shelf gathering dust never to be revisited once executed. But for too many businesses, that is exactly what happens. However, have you asked yourself whether what made sense for you and your business when you first drafted and executed the agreement fits your present reality? Do the choices you made then reflect what’s fair or even relevant now? For example, does your more active management role suggest the division of ownership should change? Have you contributed certain intellectual property (“IP”) that the agreement didn’t anticipate? Fortunately, these agreements are modifiable Maryland, Virginia, and DC. As your business needs change, so should your business’ foundational documents. Investing a little now to ensure your documents work for will save time and money in the future.
- Properly classify workers. Is that new hire you brought on really an independent contractor (also known as a 1099 Contractor)? I know your written agreement says “Employment Contract,” but unfortunately, titles don’t matter. Neither does the actual substance of the written agreement. In fact, the laws and regulations in Maryland, Virginia, and DC: if it looks, walks and quacks like a duck, it’s a duck. Stated another way, no matter what you call her, or what your “Employment” agreement says, the actual relationship between you and that worker governs whether she’s an employee or contractor. While a detailed analysis of how to determine whether a laborer is an employee or contractor is beyond the scope of this article, suffice it to say, the more control you have over how, where and when the laborer works, the more likely she’s going to be considered an employee. When considering the potential penalties, interest and personal liability for employment taxes stemming from an incorrect employee classification, it is clear it seriously impact on your bottom line. Re-classifying your workforce while seemingly daunting is far less painful than being dragged into litigation in Maryland, Virginia, and DC.
- Get Paid. Anybody who’s ever run a small business (or any business, really) in Maryland, Virginia, and DC knows that cash flow is the lifeblood of the business. Are you taking steps to ensure your business agreements are designed to keep the cash flowing? Do your agreements contain clear payment terms? Do they provide a process for following up on and penalizing outstanding invoices? Have you put the system into practice? Failure to ensure your agreements protect you will ensure that both your top line but bottom line will suffer.
- Protecting your intellectual property. For certain businesses, intellectual property (“IP”) is even more important than preserving cash flow to the business’ success. However, in too many instances, the protection of IP is put off for some seemingly more important and more immediate task. However, it is wise to conduct an IP inventory in Maryland, Virginia, and DC. Do you own the IP? Have done all you can and should to protect it? If you don’t take the right steps to safeguard your intellectual property, you could find your competitive advantage in the marketplace siphoned off by others.
Litigation is expensive, and far exceeds the relatively low cost of implementing preventative measures. Do your mom proud, and take your ounce of preventative medicine.
Legal concerns for businesses can be an overwhelming task to address. However, Longman & Van Grack’s attorneys will work with all sizes of businesses to ensure that the process is as efficient as possible If you would like to discuss your company’s legal concerns with a business attorney, such as Julian Haffner, you can reach Longman & Van Grack’s at (301) 291-5027 and meet an our Rockville, Maryland; Bethesda, Maryland; Washington, DC; or Virginia offices.