May 15, 2017
Starting today, New York City requires freelancers and the businesses that hire to enter into a written agreement specifying how much the freelancer will be paid and the schedule for payment. The law also prohibits retaliation against freelancers who try to enforce their rights under this law.
The written agreement can be as simple as an email, but it must include: the name and mailing address of the parties to the agreement; an itemized list of the services to be provided by the freelancer, the value of the services to be provided under the agreement, and the rate and method of determining the freelancer’s compensation. It also must include a schedule for paying the freelancer or a method of determining when a freelancer will be paid. If a schedule for payment isn’t included, the law says the freelancer must be paid by not later than 30 days after the freelancer completes the services under the agreement. A template is available here. Both parties to the agreement are required to keep a copy of the agreement.
This law applies where the freelancer is providing services worth $800 or more either alone or when combined with other work done by the same freelancer for the hiring party within the prior 120 days. The law applies to both individuals and corporate entities (for example, corporations, limited liability companies) where the entity is made up of a single person.
May 11, 2017
If you own a business, chances are you’ve signed an agreement with a vendor or are yourself a vendor. And chances are that agreement says something about indemnification.
So, what is indemnification? Indemnification is where one party is responsible for reimbursing another party for any damages or costs. This can happen either because the parties agree to it (preferably in writing) or because the parties have a relationship where the law assumes that indemnification makes sense. So, for example, you might enter into a contract that contains an indemnification clause requiring you to reimburse the company you’re supplying services to if one of their employees is injured by your employees or equipment. Alternatively, even without an agreement, if your accountant screws up your tax returns and you have to pay a fine to the IRS, the law might assume that your accountant should be responsible for that fine.
Why should you care? One word: money. If you agree to indemnify someone else, you’re potentially on the hook for any damages they face. If you’re asking someone to indemnify you, you’re making them responsible for damages you might have.
What should you look for? As with anything you sign, you want to understand what you are agreeing to and make sure that the agreement covers what you want it to and does not cover other things. Specifically, you want to understand what is covered by the obligation to indemnify. For example, does the obligation to indemnify cover any damages or only damages to property? Is the party that is absorbing the costs (usually called the indemnitor) agreeing to pick up the other party’s legal fees? Are both (or all) parties to the agreement agreeing to indemnify one another or is only one party responsible for indemnification?
What can you do? Make sure you understand what you are agreeing to, that the language is clear and negotiate, negotiate, negotiate. If you’re a small business entering a contract with a big company, you might not have that much leverage, but it never hurts to ask.
April 25, 2017
One of the most common, if not the most common, issue I’ve dealt with as a lawyer is what happens when the owners of a business stop being able to work together. This can happen in any form of small business – a corporation, a partnership or a limited liability company. It doesn’t matter. I’ve seen numerous variations on this, but the basic idea and problem is the same: people start a business together and either don’t write down their understanding about how they will operate or, they write an agreement, stick it in a drawer and never think about whether it needs to be updated.
Why does this happen? In my experience, there are two basic reasons: either everyone is so focused on making the business a success and working super hard that there’s just no bandwidth left to think about an agreement governing the relationship between the owners, or there’s already some conflict lurking that no one really wants to talk about. Sometimes, it’s a combination of both.
In either case, the lack of any governing document or an accurate governing document becomes a big problem when there’s a problem. This can happen when an owner dies, wants to retire or is arrested. (Yes, that happens.) It can happen when the person who has always been considered the “junior partner,” is suddenly bringing in the most business and wants a bigger share of the business’ profits or when a partner is no longer contributing at a level commensurate with his compensation. It can happen when the owners reach an impasse over a big personnel decision or how to move the business to the next level.
What happens? At some point, the issue comes to a head. There’s a good deal of frustration and hard feelings between the owners who end up having to hire attorneys to work out the issues. Not an ideal situation. If you didn’t have the bandwidth to deal with these issues when you were starting a business, this isn’t any better. f there was something no one wanted to talk about, you’re definitely going to have to talk about now, and it’s probably going to be even less pleasant because there’s been months or years of frustration and hard feelings added to the conflict. Even worse, the owners can’t work out their issues and are stuck running a business together. Obviously, that’s not good for the owners, employee morale, or the company’s bottom line.
If, having read this, you’re thinking that an agreement governing your business might be a good idea, what should you do? Start by thinking about how you want your business and your relationship with the other owner(s) to work. Ask yourself and the other owner(s) some questions: Do all owners have an equal say in the management of the business? Do all owners receive an equal share of the profits (or losses) of the business? Could this change? Are there certain decisions that can be delegated to a subset of the owners and, if so, what are those issues? What’s the mechanism for resolving disputes? How can a new person come into the business? What happens if you raise money? How does someone exit the business? What about if that person doesn’t want to leave?
Once you’ve done this, talk to a lawyer.
