Business Contracts for Startups

I have spent the past 20 (15 years in the legal industry) years drafting, reviewing and negotiating contracts in and for a variety of industries from entertainment, food and hospitality, fashion, construction, telecommunications, medical, amongst others.

Negotiating businesses contracts for business of all sizes is quite frankly my passion. I have read many books on negotiating contracts, have represented hundreds of clients on contract matters (including contract disputes) and have had the great pleasure of teaching classes about the ins and outs of contracts.

The fact is, businesses are governed by relationships: relationships between the owners/partners, relationship between the business and its customers, and the relationship between the business and its employees/contractors.

The point of a contract is to memorialize and manage people expectations in those relationships, limit liability, create mechanisms for resolving disputes, and establishing a fair and reasonable dynamic under the specific circumstances. One size rarely if every fits all. Every business is different and every relationship is unique to a degree. I take these philosophies into account whenever drafting any of the following contracts for my clients:

  • Employment Contracts
  • Website Terms and Conditions
  • Website Privacy Policy
  • Service Contracts
  • Consulting Agreement
  • Independent Contractor Agreements
  • Non Disclosure AgreementsLoan Agreements
  • Construction ContractsBroker Agreements
  • Stock and Asset Purchase Agreements
  • Purchase and Sale Agreements
  • LLC Operating Agreements
  • Partnership Contracts
  • Shareholder Contracts
  • Promissory Notes
  • Corporate Agreements
  • Sub-contractor Agreements
  • Real Estate Contracts and Leases
  • I have spent the better part of my career bringing to the table my experience as a seasoned litigator in order to protect and further my client’s interests but also to provide sound and reasonable advice in order to further the potential business relationship. The last thing anyone wants in a lawyer is an overzealous deal killer.

    Contact me for a free consultation.

    Trademark Classes Explanation for Startups

    Product (“Goods”) Classes

    Class 1: Chemical Products
    Chemicals used in industry, science and photography, as well as in agriculture, horticulture and forestry; unprocessed artificial resins; unprocessed plastics; manures; fire extinguishing compositions; tempering and soldering preparations; chemical substances for preserving foodstuffs; tanning substances; adhesives used in industry.

    Class 2: Paint Products
    Paints, varnishes, lacquers; preservatives against rust and against deterioration of wood; colorants; mordants; raw natural resins; metals in foil and powder form for painters, decorators, printers and artists.

    Class 3: Cosmetics and Cleaning Products
    Bleaching preparations and other substances for laundry use; cleaning, polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices.

    Class 4: Lubricant and Fuel Products
    Industrial oils and greases; lubricants; dust absorbing, wetting and binding compositions; fuels (including motor spirit) and illuminants; candles and wicks for lighting.

    Class 5: Pharmaceutical Products
    Pharmaceutical and veterinary preparations; sanitary preparations for medical purposes; dietetic substances adapted for medical use, food for babies; plasters, materials for dressings; material for stopping teeth, dental wax; disinfectants; preparations for destroying vermin; fungicides, herbicides.

    Class 6: Metal Products
    Common metals and their alloys; metal building materials; transportable buildings of metal; materials of metal for railway tracks; nonelectric cables and wires of common metal; ironmongery, small items of metal hardware; pipes and tubes of metal; safes; goods of common metal not included in other classes; ores.

    Class 7: Machinery Products
    Machines and machine tools; motors and engines (except for land vehicles); machine coupling and transmission components (except for land vehicles); agricultural implements other than hand-operated; incubators for eggs.

    Class 8: Hand Tool Products
    Hand tools and implements (hand-operated); cutlery; side arms; razors.

    Class 9: Computer and Software Products and Electrical and Scientific Products
    Scientific, nautical, surveying, photographic, cinematographic, optical, weighing, measuring, signalling, checking (supervision), life-saving and teaching apparatus and instruments; apparatus and instruments for conducting, switching, transforming, accumulating, regulating or controlling electricity; apparatus for recording, transmission or reproduction of sound or images; magnetic data carriers, recording discs; automatic vending machines and mechanisms for coin operated apparatus; cash registers, calculating machines, data processing equipment and computers; fire extinguishing apparatus.

    Class 10: Medical Instrument Products
    Surgical, medical, dental, and veterinary apparatus and instruments, artificial limbs, eyes, and teeth; orthopedic articles; suture materials.

    Class 11: Environmental Control Instrument Products (lighting, heating, cooling, cooking)
    Apparatus for lighting, heating, steam generating, cooking, refrigerating, drying, ventilating, water supply, and sanitary purposes.

    Class 12: Vehicles and Products for locomotion by land, air or water
    Vehicles; apparatus for locomotion by land, air, or water.

    Class 13: Firearm Products
    Firearms; ammunition and projectiles; explosives; fireworks.

    Class 14: Jewelry Products
    Precious metals and their alloys and goods in precious metals or coated therewith, not included in other classes; jewelry, precious stones; horological and chronometric instruments.

    Class 15: Musical Instrument Products
    Musical instruments

    Class 16: Paper and Printed Material Products
    Paper, cardboard and goods made from these materials, not included in other classes; printed matter; bookbinding material; photographs; stationery; adhesives for stationery or household purposes; artists’ materials; paint brushes; typewriters and office requisites (except furniture); instructional and teaching material (except apparatus); plastic materials for packaging (not included in other classes); printers’ type; printing blocks.

    Class 17: Rubber Products
    Rubber, gutta-percha, gum, asbestos, mica and goods made from these materials and not included in other classes; plastics in extruded form for use in manufacture; packing, stopping and insulating materials; flexible pipes, not of metal.

    Class 18: Leather Products (not including clothing)
    Leather and imitations of leather, and goods made of these materials and not included in other classes; animal skins, hides; trunks and traveling bags; umbrellas, parasols and walking sticks; whips, harness and saddlery.

    Class 19: Non-Metallic Building Material Products
    Building materials (non-metallic); nonmetallic rigid pipes for building; asphalt, pitch and bitumen; nonmetallic transportable buildings; monuments, not of metal.

    Class 20: Furniture Products
    Furniture, mirrors, picture frames; goods (not included in other classes) of wood, cork, reed, cane, wicker, horn, bone, ivory, whalebone, shell, amber, mother-of-pearl, meerschaum and substitutes for all these materials, or of plastics.

    Class 21: Houseware and Glass Products
    Household or kitchen utensils and containers; combs and sponges; brushes (except paint brushes); brush-making materials; articles for cleaning purposes; steel-wool; unworked or semi-worked glass (except glass used in building); glassware, porcelain and earthenware not included in other classes.

    Class 22: Ropes, Cordage and Fiber Products
    opes, string, nets, tents, awnings, tarpaulins, sails, sacks and bags (not included in other classes); padding and stuffing materials (except of rubber or plastics); raw fibrous textile materials.

    Class 23: Yarns and Threads
    Yarns and threads, for textile use.

    Class 24: Fabrics and Textile Products
    Textiles and textile goods, not included in other classes; beds and table covers.

    Class 25: Clothing and Apparel Products
    Clothing, footwear, headgear.

    Class 26: Lace, Ribbons, Embroidery and Fancy Goods
    Lace and embroidery, ribbons and braid; buttons, hooks and eyes, pins and needles; artificial flowers.

    Class 27: Floor Covering Products
    Carpets, rugs, mats and matting, linoleum and other materials for covering existing floors; wall hangings (non-textile).

    Class 28: Toys and Sporting Goods Products
    Games and playthings; gymnastic and sporting articles not included in other classes; decorations for Christmas trees.

    Class 29: Meat and Processed Food Products
    Meat, fish, poultry and game; meat extracts; preserved, frozen, dried and cooked fruits and vegetables; jellies, jams, compotes; eggs, milk and milk products; edible oils and fats.

    Class 30: Staple Food Products
    Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee; flour and preparations made from cereals, bread, pastry and confectionery, ices; honey, treacle; yeast, baking powder; salt, mustard; vinegar, sauces (condiments); spices; ice.

    Class 31: Natural Agricultural Products
    Agricultural, horticultural and forestry products and grains not included in other classes; live animals; fresh fruits and vegetables; seeds, natural plants and flowers; foodstuffs for animals; malt.

    Class 32: Light Beverage Products
    Beers; mineral and aerated waters and other nonalcoholic drinks; fruit drinks and fruit juices; syrups and other preparations for making beverages.

    Class 33: Wines and Spirits (not including beers)
    Alcoholic beverages (except beers).

    Class 34: Smoker’s Products
    Tobacco; smokers’ articles; matches.

    Service Classes

    Class 35: Advertising, Business and Retail Services
    Advertising; business management; business administration; office functions.

    Class 36: Insurance and Financial Services
    Insurance; financial affairs; monetary affairs; real estate affairs.

    Class 37: Construction and Repair Services
    Building construction; repair; installation services.

    Class 38: Communication Services
    Services allowing people to communicate with another by a sensory means.

    Class 39: Transportation and Storage Services
    Transport; packaging and storage of goods; travel arrangement

    Class 40: Treatment and Processing of Materials Services
    Treatment of materials.

    Class 41: Education and Entertainment Services
    Education; providing of training; entertainment; sporting and cultural activities.

    Class 42: Computer and Software Services and Scientific Services
    Scientific and technological services and research and design relating thereto; industrial analysis and research services; design and development of computer hardware and software.

    Class 43: Restaurant and Hotel Services
    Services for providing food and drink; temporary accommodations.

    Class 44: Medical and Beauty Services and Agricultural Services
    Medical services; veterinary services; hygienic and beauty care for human beings or animals; agriculture, horticulture and forestry services.

    Class 45: Personal, Legal and Social Services
    Legal services; security services for the protection of property and individuals; personal and social services rendered by others to meet the needs of individuals.

    FAQ’s: Deposition Do’s and Dont’s

    How to Prepare for & Give A Great Deposition 

    • Understand the deposition process
    • Understand the lawyer’s objectives
    • Always tell the truth
    • The best answers, if truthful are:
      • “Yes”
      • “No”
      • “I don’t know”
      • “I don’t remember”
    • Listen to the question, pause, & think before you answer
    • Do not answer a question unless you clearly understand the question
    • If you do not understand the question, just say so!
    • If you do not know the answer, say “I don’t know”
    • If you do not remember the answer, say “I don’t remember” and then stop talking
    • Do not confuse “I don’t know” with “I don’t remember”
    • Don’t answer “Yes” or “No” to a question if the question can’t be answered accurately with “Yes” or “No”
    • Never speculate or guess
    • Answer questions based on your own personal knowledge
    • If questioned about a document, ask to review it before you answer
    • Take the time to read the document fully before you respond
    • If asked to assume a fact, make it clear it is the attorney’s assumption, not yours
    • Answer only the question asked
    • Never volunteer information
    • Do not try to restate or fix the attorney’s question
    • Do not let the attorney put words in your mouth
    • Do not think out loud
    • Do not apologize or make excuses
    • Do not offer your comments about the quality of the question
    • Do not exaggerate or overstate
    • Give the shortest possible truthful answer and then stop talking
    • Use a verbal “Yes” or “No”
    • Do not ramble or go off on tangents (see do not volunteer above)
    • If the attorney interrupts you before you finish your answer, tell him or her that you were not finished
    • Pay close attention to the questions
    • If your attorney object to the question, stop talking and listen closely
    • After your attorney objects, wait before you answer to see if the attorney is instructing you not to answer
    • If your attorney instructs you not to answer, don’t answer
    • Be calm. Never get angry.
    • Do no argue with the opposing attorney or opposing side
    • This is a serious process so no  jokes
    • Do not interrupt the question
    • Pause and think about the question before you start your answer
    • Talk slowly (makes it easier for you to articulate your thoughts and the Court reporter will love you for it)
    • Do not look at your own attorney for help
    • Correct any mistakes you made during your deposition
    • Ask for regular breaks
    • Do not use alcohol or drugs that can affect your performance
    • Dress in a way that makes you comfortable or confident.
    • Give the shortest but truthful answer
    • Watch out for questions that assume facts that are not true
    • Do not let the attorney limit your choices
    • Do not let the attorney incorrectly summarize your testimony
    • Beware of absolutes like “always” and “never”
    • Remember that nothing is “off the record”
    • Look out for the “… is that all?” question.
    • There is nothing wrong with saying you met with your lawyer before the deposition
    • Do not bring any documents to the deposition unless your lawyer tells you to do so
    • Do not take notes in the deposition. You’ll have to give that to the attorney when you’re done and you don’t want to risk disclosing confidential information.
    • Tell you lawyer your concerns before the deposition
    • Admit the obvious, even if it hurts.
    • Do not let the attorney bully you
    • Do not be evasive
    • Look out for “leading” questions
    • Do not offer to do anything after the deposition ends
    • Discuss questions you have with your lawyer at the next break
    • Be confident and strong

    FAQ’s A Successful Approach to Depositions

    Depositions are one of the most critical aspect of any complex litigation. It’s an opportunity to get answers, even if the answers are not always in line with your assumptions.

    I look to depositions as a form of negotiations: constantly digging deeper to understand the witness his/her motivations, grievances, perceptions, and facts. I’m always advocating for my client but the best way to advocate for a client in a deposition is not to badger, annoy, or infuriate the witness. The absolute best way to conduct and manage a deposition is to think of it as a form of negotiation and that involves active listening.

    A good deposition consists of two forms of questions, with an emphasis on the second form:

    1. fishing with a spear gun
    2. fishing with a net

    Fishing with a spear gun refers to those careful, targeted questions. Generally this refers to questions that are “yes” or “no” until I have painted the witness into a corner.

    Fishing with a net means asking broad questions, creating space and opportunity for the witness to expand on their response, to voice their grievance, to explain their concerns and the things that are most critical to their position. Fishing with a net means I’m not really asking targeted questions but just trying to dig as deep as I can into the witnesses position and state of mind. More often than not through this approach I’ll find nuggets of truth that are useful in understanding the strengths and weaknesses of the case from both sides. By asking broad questions and giving the witness time and space to respond (physically just waiting 5 -7 seconds) I also find they tend to paint themselves into a corner with a flood of facts and emotions.

    That being said, when fishing with a net, I always keep the goals of the deposition in mind: prove the elements of my claim or defense AND identify weaknesses in the elements of the other side’s claims or defenses.

    Usually, to prepare for a deposition I have a checklist of goals, just to keep me focused on the questions I may want to ask or address because the one danger in digging deeper/fishing with a net is you can get a little lost in the weeds or on issues that have very little bearing or relevance to the actual lawsuit. As such, the checklist of goals helps me get back on track with my questioning or assists me in knowing when to shift gears in my line of questioning.

    To also prepare for a deposition, I identify correspondence or other documents (including the Complaint, the Answer and responses to Discovery Demands) that I want to walk through with the witness to confirm the accuracy of any statements or confirm that the allegations in the Complaint or Answer are still true as the witness understand them.

    The take away here is, a deposition is an investigative process. I want to understand as much as possible especially if it impacts the case. Embarrassing, humiliating, or intimidating the witness is not a productive goal and it’s certainly not a professional approach. I have witnessed many attorneys forget this. It’s an expensive, unproductive waste of time. We’re all there to get to the truth and try to resolve a dispute. Getting angry, worked up, or any histrionics on any level for that matter do nothing for you. Any attorney who says otherwise is selling you garbage.

    FAQs: The Trademark Attorney Process

    The process of preparing and filing your trademark application includes researching the proposed trademark, preparing the application, filing the application, and responding to “office actions” from the United States Patent and Trademark Office (USPTO).

    • $350 per class of goods/services (click here for a list of classes)
    • $300 – $400 for the clearance search/conflicts search
    • If a “Statement of Use” is filed separate from initial application: add $200

    Trademark Prosecution and TTAB

    • Prosecution is the period of back and forth with the USPTO, fighting to get the application approved, and docketing and responding to office actions.
    • For applications without serious objection, the back and forth is minimal. This is the outcome in most applications that use unique, non-descriptive names (e.g. KODAK)
    • If the examiner digs in on a rejection, and we want to fight for it, we may have to appeal to the TTAB.  This is rare.
    • Other parties can oppose your mark, this starts a mini-litigation before the USPTO Trademark Trials and Appeals Board (TTAB) over whether you should get a registration.  This is rare.

    It is important for clients to know that, at the end of the day, while preparing and filing the trademark application is a predictable task that we can do a fixed fee on, the later prosecution of that application is more like litigation – its an adversarial process between us and the USPTO.  We can be pretty confident which ones will be objected to, but it is really hard to predict with any accuracy more than that.  

    This is why it is best for clients to pick names that are unique and non-descriptive.  E.g. consider “KODAK” for cameras.  KODAK is a made up word that has no meaning in any language, it is unique and non-descriptive, you could use it as a trademark on anything.  

    USPTO Trademark Process:

    After the application is submitted, within 3-6 months the USPTO will issue a response. Commonly, the USPTO will issue an Office Action to discuss any substantive or procedural issues with the application/mark. A response is due within 6 months. The USPTO will then approve/deny the registration. If approved, the registration will be published for public opposition. Once the opposition period ends, a registration certificate will be issued based on use. 

    If application was filed with a statement of use, the mark will receive registration status.  If the application was filed based on the intention of use, a statement of use need to be filed within 6 months. 

    Registration updates are required between the 5th and 6th year (§8 or §8 & §15) and again between the 9th and 10th years (§8 & §9) to remain active.

    You should allow for 12-18 months for the full registration process. Occasionally, a quicker turnaround can be warranted.

    USPTO Filing Fees:

    $350 per class, per mark. However, no additional fees are required during the normal processing, including Office Actions.

    Statements of Use, if not filed with the application, are $100. Amendments and extensions range from $100-125.

    USPTO Renewal Fees:

    §8: $125 per class, per mark.

    §9: $300 per class, per mark.

    §15: $200 per class, per mark.

    USPTO accepts payment by Credit Card, USPTO Deposit Account, Electronic Funds Transfer.  Fees are paid independently. USPTO fees listed for electronic filing and are subject to change.

    Partnership Guide: 40 Questions for Any Partnership Agreement

    A Guide to Putting Together Your Partnership Agreement

    By Jeffrey K. Davis, Esq.

    WHAT SHOULD YOUR BUSINESS GOVERNANCE AGREEMENT ADDRESS?

    The following is a 40-point checklist that you should use when drafting a business partnership agreement. This is not an all-inclusive list but I have to say, it’s pretty close and has broad applications for many industries. The purpose is to get you thinking about your rights, your expectations and the process of running a company with someone else. Use this as a guide, as a conversation starter, as a template for a well-vetted and successful partnership.

    Management Structure.

    1. Who will be involved in the day to day activities?
    2. Who will manage this company at a high-level?
    3. Who or how will the money be managed?
    4. How will decisions be made? For example, majority vote, unanimous vote, etc.
    5. What are critical decisions for you that require your approval?
    1. How will decisions be made with respect to acquiring property, personal property, real property, intellectual property, inventory, etc.?
    2. How will decisions be made with respect to selling or purchasing assets?
    3. How will decisions be made with respect to hiring, firing and disciplining employees, consultants, vendors, legal counsel, accountant, etc.?
    4. How will decisions be made with respect to the purchase of life insurance, liability insurance, disability insurance, general liability insurance and other insurances?
    5. How will decisions be made with respect to opening and maintaining bank accounts, borrowing money, lending money, bookkeeping, accounting, fundraising, or adopting a annual budget?
    6. How will decisions be made with respect to instituting, prosecuting and defending legal, administrative or other suits or proceedings in the Company’s name?
    7. How will decisions be made with respect to establishing pensions, and incentive plans for any or all current or former owners, Managers, employees, and/or agents of the Company?
    8. How will decisions be made with respect to fixing salaries for any member, manager, officer, director, etc.?
    9. How will decisions be made with respect to, contract management, debt collection practices, or receivables due to the Company?
    10. How will decisions be made with respect to Taking on new members/shareholders/owners

    Financial Structure

    1. Have you had a discussion with your business partner about the financial needs of the company?
    2. What are the financial needs of the company to stay afloat, and for how long?
    3. What is the company’s overhead?
    4. What do you need to break even?
    5. What will you need in order to keep the business afloat for 3 -6 months such as in the case of a global pandemic?
    6. Will you as business partners be contributing or lending money to the company?
    7. What sources of funding have you considered, such as loans vs. investors?
    8. What are your financial goals or expectations of the first 6 months? Year? 5 years?
    9. Will the company make any distributions or declare dividends? If so, under what circumstances? How often?

    Dispute Resolution

    1. What if there is an important decision that needs to be made and the owners are at a deadlock?
    2. How will you resolve disputes quickly and at minimal expense? NOTE: One option might be to put together an independent board of advisors that agrees to be the tie breaker specifically for deadlock issues. Another option might be to submit the claim to binding arbitration or mediation. Another might be to vest the final tie breaking decision in a trusted advisor.

    Your Expectations in the Business

    1. Will you or your business partner be receiving a salary?
    2. Will you or your business partner be receiving any other form of compensation?
    3. Will you or your business partner be involved in the management of the company?
    4. Will you or your business partner be employed by the company ? What are your expectations with respect to being employed by the company? For example: for a set number of years, set salary, set job title, etc.?
    5. Will you or your business partner be required to devote a set number of hours per week/month to the Company?
    6. Will you or your business partner be expected to spend a minimal amount of time in the company office?
    7. Will you or your business partner be required to devote minimal number of hours per week/month to the company and its activities?
    8. Will you or your business partner be able to engage in competing or other businesses?
    9. Will you or your business partner be able to engage in other non-competing businesses?

    Death of a Business Partner

    1. What happens if one of the principals of the partnership dies? NOTE: Usually this is handled by a buy-sell clause/contract that is funded with a life insurance policy.

    Debt of a Business Partner

    1. What happens if any of the partners becomes financially insolvent and declares a bankruptcy, will you have to take on that partner’s creditors as your new partners?
    2. How will you protect the company from the debt’s of one of the business owners?

    Divorce of a Business Partner

    1. Let’s say you’re a partner with Sally. But she and her husband Jim get a divorce and in the settlement Jim gets half of Sally’s interest in your partnership. Do you really want to be forced to take Jim into your partnership? How will you handle this situation?

    Disability of a Business Partner 

    1. What happens if one of the partners is hurt and is no longer able to contribute their time and talent to the partnership, how will this effect their ownership interest and the way profits are split? NOTE: Disability in my view is worse than death. You’ve lost your ability to make an income, it can be burdensome on your family (emotionally and financially), so if you’re business is centered around you, then why not consider something like disability insurance? And if that makes sense to you (which it should) then why not figure out how to have the business pay for it as a potentially deductible expense?

    FAQs: The Preliminary Conference

    Litigation in New York courts is governed by rules set forth in the New York Civil Practice Law & Rules (CPLR), “Uniform Rules”, local/judges’ rules, and case law.

    The Preliminary Conference (“PC”) is the first conference in the case (hence “preliminary”) and the first time the case has deadlines that are imposed by the Court itself such as the deadlines for discovery demands to be served, the deadlines for responses to discovery demands, the deadlines for when depositions should be conducted, and the deadline for when the case should be ready for trial.

    The PC sets the schedule for your lawsuit.

    The timing, procedure, and other mechanics of the Preliminary Conference are codified in Section 202.12 of the Uniform Civil Rules for the Supreme Court and the County Court (codified at Title 22 of the New York Codes, Rules and Regulations, 22 NYCRR 202.12).

    .Section 202.12 provides, inter alia, that the following matters to be considered at the PC include:

    1. simplification and limitation of factual and legal issues, where appropriate;
    2. establishment of a timetable for the completion of all disclosure proceedings, provided that all such procedures must be completed within the timeframes set forth in subdivision (b) of this section, unless otherwise shortened or extended by the court depending upon the circumstances of the case;
    3. Where the court deems appropriate, it may establish the method and scope of any electronic discovery;
    4. addition of other necessary parties;
    5. settlement of the action;
    6. removal to a lower court pursuant to CPLR 325, where appropriate; and
    7. any other matters that the court may deem relevant.

    22 NYCRR 202.12(c).

    The result of the Preliminary Conference is an Order (the Preliminary Conference Order with which the parties must comply.

    The PC Order, in addition to including various discovery deadlines, will also set a “Compliance Conference”, where the parties will again meet at court and discuss what, if any discovery, remains outstanding.

    Partnership Guide: Evaluating Your Potential Business Partner

    Over the years I’ve represented hundreds of startups, joint ventures and partnerships. I’ve even been a part of a few partnerships myself and had I put myself through the same 42-part test below perhaps some of those relationships would not have ended so miserably. People rush into business relationships all too often because we’re human beings and as much as we may want otherwise, we’re emotional by our very nature. It is one our greatest strengths but also greatest weaknesses. We put aside logic and reason for validation.

    If you’re thinking about bringing in a partner, collaborating with another business on a project, or going into business with a long-time friend, I urge, no I beg you to go through the list below when you’re formalizing your strategic relationship.

    There’s a saying that summarizes this best: “sometimes it’s better to leave them at the alter rather than suffer a messy divorce”. The point of this is to think things through and in doing so taking a more calculated approach to the best extent that you can.

    I.         VALUES: All business planning, whether it’s your own business or a shared business starts with determining your core values. These core values can be a mix between personal and business (as they tend to overlap). These core values are the heart, root, and foundation of your business. To help you visualize this better, think of a mission statement as a recitation and memorialization of your core values. Now place that mission statement in the middle of a white board (often referred to as a vision board). The mission statement is the heart of your business. It is placed in the center. From the heart-center you have branches that connect to different goals, and hanging below each of those goals is the process for achieving your goals. Everything centers and revolves around your mission statement because it consists of your values i.e. what matters to you most as part of the vision for your business, for your life, and for your customers. Now, when visualizing this vision board, focusing on that heart-center, ask yourself the following about your potential business partner:

    1. Do you share similar values?
    2. Will you both fundamentally be moving in the same directions?
    3. Do you both want the same or complimentary things? Not everything has to be identical and sometimes that is a good thing. The goals and process are things that may change and adapt through the course of your business lifecycle. That’s quite common. The core of what your business is about, it’s values, are more akin to a constitution, like the constitution of the United States. That constitution doesn’t change and should ring true for both you and your potential business partner.
    4. What things do you want that might be at cross-purposes with each other?
    5. Where do you want to be? What do you envision for your business in a broad sense?
    6. What do you feel about the vision for your future?
    7. What are the principles and values that are important to you and for your business?
    8. What is the “greater purpose” for your business?
    9. How are you going to be different than the rest?

    II.        CONFLICT: Dealing with conflict in your business is something that most business owners overlook. I’ve come across some incredibly brilliant business owners starting out, ready to take on the world, and in their zeal they didn’t take the time to consider how conflict is inevitable in all relationships in your business. The source of conflict is at minimal three-fold: partners, clients, and people that work for you. How people handle conflict will drastically effect your ability to function and could impact the culture of your business overall. Conflict between business partners can bring a business to a halt. If your business partner does not have the wherewithal to productively and efficiently address conflict in your business, it can effect the management of the employees and the level of necessary customer service. Conflict is inevitable because relationships are complicated and emotional. Conflict is the result of expectations not being met and the failure to communicate and document those expectations. With that in mind, think of the following:

    1. How does your prospective partner deal with conflict?
    2. Is your partner’s approach to conflict a match for your style?
    3. How does your prospective business partner communicate with you or others?
    4. How does your prospective business partner treat others that perform services for him/her?
    5. In times of stress will your prospective business partner stay the course or cut and run?
    6. How have they dealt with conflict in their past personal and business relationships?
    7. What happens if you and your partner reach an impasse, an irreconcilable difference on a fundamentally important issue? How will you handle it?

    III. WORK ETHIC: I represented someone who fought with her sister over their business of 20 years. One of the key aspects to the dispute was that the opposition claimed my client quit because she “gave up on the business” by not showing up at the office. For many reasons they were wrong which is why we ended up being successful in the lawsuit and forcing the other side into agreeing to a substantial (well above market) buy out. However, it raised a lot of questions over whether one’s work ethic has consequences for their ownership in the business. If the attorneys who drafted the shareholder agreement were more clear on that point then perhaps we would have lost. Regardless of win or lose, those types of expectations should be addressed before you start the business (and preferably in writing) because they are absolutely a source of tremendous conflict down the line if expectations are not met. With that in mind consider the following:

    1. What type of hours will this person work?
    2. How much work will they put into those hours?
    3. How effective are they at what they do?
    4. What is their work style and can you live with it?
    5. What are your expectations for each other in terms of time devoted to the business?
    6. Where will people be working from? (e.g. an office, home, both?)
    7. How will you be accountable to each other and the business? In other words, how will you  measure and keep track of your business partner’s work efforts?
    8. What metrics will be used to measure the efficacy of your business partner’s contributions?

    IV. INTEGRITY: Integrity is something that is often overlooked but critical for the survival of a clean and healthy business relationship. Integrity is the root of trust. If we’re being technical we’re talking about the quality of being honest and having strong moral principles; moral uprightness. It’s about the practice of being honest and showing a consistent and uncompromising adherence to strong moral and ethical principles and values. It’s about consistency. With that in mind consider the following:

    1. Do you trust this person?
    2. Is that trust based on real data or an emotional connection?
    3. How has this person behaved in their past?
    4. Does this person consistently meet their commitments, big or small?
    5. Will this person do what’s right, especially when it isn’t convenient or profitable?
    6. How does this person act when others are not present?
    7. How does this person speak about others when they are not present?
    8. Does this person follow through on their promises?
    9. How transparent is this person in their responses, access to information, and personal/business dealings?

    V. THE ADD-VALUE: Determining the add-value is a more practical line of questioning. You’re trying to determinewhat you and your business partner bring to the table and if those are valid reasons for entering into this potential partnership. You’re trying to understand what about this potential relationship will make your business venture successful and profitable. You’re trying to understand how this person will work with you to realize your end goals. Your answers or motivations should not be just about money. In addition, if your responses to these questions are motivated because of fear, then you should reconsider the partnership altogether. With that in mind consider the following:

    1. What are your skills, talents, and resources that you and your business partner bring to the table that bring elements for success of your business?
    2. How do you complement each other?
    3. How do you and your business partner make for a stronger foundation for your business?
    4. Do you share a similar vision?
    5. Have you been able to discuss short term and long term goals?
    6. Is your business partner bringing something to the table that is more than just money?

    VI. RELIABILITY. It’s a simple question really. Can you rely on this person? Is this the type of person you have to lie to in order to get them to meet you on time for dinner? If so, they’re not so reliable, and you may want to re-consider getting into a sophisticated business relationship with them that involves having to rely on their actions and ability to execute time sensitive decisions.

    1. Do they or will they come through as promised?

    The foregoing is meant as a guide. It’s not a bible, it’s not law, it’s not set in stone. It’s nothing more than a thought provoking guide that I trust you’ll use as the baseline for considering a business partnership.

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