Legal Stuff You Need to Know to Stay in Business

eWomenNetwork member, Attorney Nancy Greene, shares the most important legal documents you need to start a business, how to hire a lawyer for your business even if you're broke, what to do if you and your business gets sued and the most important people you need on your team (even if you are a solopreneur).

Watch highlights of the podcast video below or listen to the entire interview on the eWN Podcast Network. 

Below is the edited transcript from the interview with Nancy Greene. Click here to listen to the entire interview at eWN Podcast Network. 

My Big Mistake that Changed My Business

PHYLLIS SMITH: Before we get into all the legal stuff yet, and don’t turn off yet everybody because I know when you hear “legal” you’re like - err - boring. Believe me there is nothing boring about this, and it is vital, and you need this stuff if you want to be in business. So, before we get that, tell us if you’ve ever been in a position yourself where one bad decision threatened everything you built.

NANCY GREENE: Yeah, it’s sad to say, but “yes” it even happens to attorney’s that we can make that same slip up and essentially not take our own advice. Yeah, I went into a partnership with another law firm that didn’t documented well, didn’t have the right culture fit to me and that legally put me at risk at both the career I was building and affected a lot of my client relationships.

PHYLLIS SMITH: Tell me more about that. So, what where the dirty details [laughter] on that and what did that feel like for you, especially someone who “should know better”.

NANCY GREENE:  It makes you feel like dirt. Not just that, I'm thinking, “Oh my God I made this mistake, and I’m 18 years into the career and I’m at risk of not having a career anymore.” But I know better than that, right? I tell people not to do that.

So, what happened is I made all the excuses that everyone makes when they make these mistakes knowing that I shouldn’t. So, my second law firm at the time was blowing up. We had 2 different offices and the DC partners were fighting with the Virginia partners and I was sort of monkey in the middle.

I was a partner who sat in Virginia, but worked mostly with the DC group and had about 30 days to figure out what I was going to do with my career. And another firm that had been chasing me kind of popped in and said, “Hey, we can do something better with you.” And because of that time pressure that I put on myself and was feeling at the time that I was the primary bread winner and I was the one carrying our insurance. I jumped in with this other firm without doing my due diligence to see if we work - and worse, I didn’t I get what we actually agreed to in writing.

  I jumped in with this other firm without doing my due diligence to see if we work - and worse, I didn’t I get what we actually agreed to in writing.  

So, as that relationship progressed I said, “Hey, the deal was 6 months and I become an owner, right? And they're like, “Well that wasn’t the agreement.” (or) “Hey, this is what my compensation was supposed to be and - No, that’s not what we agreed to at all!”

I ended up leaving that firm 8 months into it, because there were all these questions coming back and forth about what we had actually agreed to. And some of the emails I wasn’t overly worried about, because I knew I had email traffic as to what we had agreed to. Well, all those emails mysteriously disappeared from my email account that my business partner had control of as well. So, the documents I thought I had - not so much, because I didn’t take the extra steps to protect them. So, that was a nightmare.

PHYLLIS SMITH: Is it because of that experience that you take on the challenge to help others and prevent a similar situation that you were in?

NANCY GREENE: Oh absolutely! I mean a couple things were going on that time. One was being in that situation myself, and what I was starting to do at about the 18 year mark was look back at my career and look at my clients and the problems they were having in common and I noticed more and more women had these problems of getting into these bad partnerships. In my case it was a good friend’s business partner or the husband's good friend or someone they met through church but didn’t really know. So there was that appearance of trustworthiness and relationship that really wasn’t there. It was a secondary or third relationship, and women almost consistently weren’t documenting those agreements and then in the end those agreements were turning around and biting their backsides off.

So, now they’ve built this business with someone and either the business got blown up from the dispute or the other person took out it, or it just became a mess. So, that’s really when I started this focus on it. There’s not a whole lot of information out there for business owners to avoid making these mistakes. If I made it with my background, you know, holy goodness, how is someone else who does not have that background going to be able to avoid this mess. 90% of it should be avoidable. So, yeah that’s where I got really passionate about going out and speaking and talking to people about these mistakes that we justify all the time, “Oh maybe it’s not gonna work.” (or) “Let’s not spend the money.” (or) “I trust this person.” Don’t sell yourself short like that.

The Accidental Nasty Email that Changed My Life

PHYLLIS SMITH: Yeah. So, you made the mistake. You help others avoid those mistakes and you’ve written a book also about this called Navigating Legal Landmines. It’s something is prevalent and it could destroy a business. You have so many great tips that you can offer business owners, but before we even do that, there is something interesting about you that is part of your journey. You’ve lost a significant amount of weight. Why and how is that impacting your business?

NANCY GREENE: So, 2 reasons on the why. First, I actually started a process with Celebrity Science which was the re-branding and the up-leveling of everything.  I learned, among other things, “Hey, by the way you’re wearing a size to big.” I started changing how I looked at myself and how I interacted with people.

About 6 months into the Celebrity Science process I was doing and litigating a case that’s still actually ongoing, My opposing counsel, who is male, accidentally copied me on an email that was a very frank and not so flattering discussion of what me naked would be. So, that kind of made me sick to my stomach.

PHYLLIS SMITH: Ouch.

NANCY GREENE: Yeah [laughter], and so that had some issues with that and how that played out. But it really got me looking at myself even more as to how did I want to be showing up? I had always said I really need to get back in shape and be something other than, you know, oval. That was sort of the kick in the pants that finally made me say, you know, enough. Enough. It’s gotta become a priority for me and not just lip service. So, that’s what really started me on that journey.

 That polished professional, socially conforming look matters a lot in how you feel and how you present.   

PHYLLIS SMITH: Now, also because you definitely work with a lot of women entrepreneurs, I want to go back now to what we were talking about in helping other women entrepreneurs avoid the legal landmine that had happened to you. Is it more prevalent for women entrepreneurs to get themselves into a legal mess in regards to their business?

NANCY GREENE: You know, in looking back at over 20 years as a business lawyer and business litigator that, yes, seems to be. In part because we’re so relationship focused that sometimes we’re afraid to ask for that document. Sometimes we don’t think about it and we’re a little, you know, eye in the sky. We think everything is gonna work out great. Or we started with the business as kind of a hobby and it grows, and we just never take the steps to bring it forward. As a woman attorney, I tend to draw more women clients anyway, because there’s that synergy. Even looking at my partners who litigate, there’s a lot more disputes where the woman is a business owner, which I also found when I was a solo practitioner. I’d have bigger firms and male attorneys be much more aggressive with me as solo woman with my own law firm. It was

that whole perception that, “Hey, a woman might be easy pickings." [laughter]

50/50 Partnership is a Bad Idea

PHYLLIS SMITH: Hmmm … yeah, we don’t want to be that way but by the same token it’s our gift and our magic as a woman to have that softer touch, and to be socially conscious in that way in terms of relationship conscious. That could also lead to something that could be a really big mistake is that when women go into a partnership they want this equal partnership. They want to do 50/50 but that is not the way to go. Am I correct on that, and if so explain why?

NANCY GREENE: It is almost never the way to go. Women owned business or male owned business - it doesn’t really matter to be a 50/50 unless you set out rules on how  to deal with that. If you’re 50/50 what ends up happening sometimes in business, you log jam, right? One wants to go one way and one wants to go the other way, and as you keep doing this your company can’t progress. In fact your company usually gets ripped apart because one wants to take this business opportunity and one wants to take that business opportunity, and you can’t agree. Now you're stagnated, because there’s that resentment that grows between you.

So, it’s almost never a good idea to have 50/50 even when I’ve got a husband and wife couple that comes in and says, “Hey, we want to be a business and we want to be 50/50.” And I’ll say, “Stop. Whose business is this really?” Cause it’s always one spouse’s. It’s always one who’s going to be working it and one who’s going to be supporting it. If you really insist on 50/50 against my advice, I’ll write into the Operating or Shareholders Agreement that if there’s a tie, the person whose business it really is breaks it. So, now I’ve gotten you out of that deadlock and how to resolve those disputes. Again, sometimes when it’s truly 2 people coming in equally you say, “Okay, this is your sphere of influence - you’ve got finances, so you’ve got the deadlock breaking vote here and not here.” If you’re gonna do 50/50, you have to have some way to break that deadlock.

PHYLLIS SMITH: Yeah, cause that could be that one gotcha. It’s in the spirit of doing the right thing and wanting everybody to have an equal share, but at the end of the day that can destroy a business. 

Top Documents Every Business Needs to Stay in Business

PHYLLIS SMITH: Can you just kind of give me a list of like top 3 documents that are essential to a business?   

NANCY GREENE: Absolutely. So, if you have a business partner, if there’s more than one owner, you either need an Operating Agreement or a Shareholders Agreement depending on the type of company you have. You need a standard Client Agreement. You need a standard Confidentiality Agreement with your employees, and sometimes depending on what they’re doing, you may want to have further restrictions upon them, but at least Confidentiality.

PHYLLIS SMITH: You also talk about an organizational chart. Jobs descriptions that even if you’re a solopreneur it’s important to have that. Why is that?

NANCY GREENE: A lot of reasons. The reason to do the job chart and the organization chart is if you don’t where you’re going, it’s really easy to get off track, right? So, if you have the job chart of this my idea for my company, this is how big we’re gonna get, and you start filling out the job descriptions of this person’s going to do this and this persons going to that. As your business grows and bringing people in, having that plan and having those job descriptions allows you to say, “This is what I’m letting go of, and this is the person I need to bring in.” You can be very methodical and planned and organized about that and having that blueprint ahead of you really helps you miss a lot of the missed forks in the road. Should I be going in this way? Should I hire this person? Well my need right now on my job chart is a web person and not another sales person. So, let me go fill that gap. So, it helps you make conscious choices about how to grow.

PHYLLIS SMITH: Oh wow! So, if you’re a solopreneur, how would that look? What would that organizational job description chart look like for a solopreneur?

NANCY GREENE: So, still the same thing. When I was a solo firm, I spent the time and wrote down, “Okay, this is all the crud I’m doing. This is all the lawyer stuff I’m doing. This all the administrative, bookkeeping stuff I’m doing. This is all the research, paralegal stuff that I could give out to someone else.” And as the revenue came up to the point where I could justify hiring someone I knew the first things to get off, and I knew the person I wanted to look for. I knew I wanted an associate that could handle these types of cases. I knew I wanted a bookkeeper who could handle this slice, and that allowed me to take the stuff off my plate and focus on the stuff I could do on the overarching design of the business, servicing the clients only I could do at the level I could do it. So, it allowed me to grow with a plan in mind just the same as if I’d already had 10 people starting with me.

PHYLLIS SMITH: That actually is great business advice overall for any entrepreneur. How does that help you from a legal perspective?

NANCY GREENE: From a legal perspective, there’s 2 laws that most businesses are going to have pay attention to. Some of them are size related. One is the Fair Labor Standards Act. Which is whether or not someone gets overtime - for the most part that’s what that law covers. One’s the American’s with Disabilities Act. For both of those laws, whether or not you have to pay someone overtime, really primarily depends on what they’re doing. So, having that job description allows you to make a better decision as to whether they’re exempt and not entitled to overtime or need overtime. If someone then would claim they should’ve gotten overtime, it’s another way to defend yourself.

And then for the American’s with Disabilities Act, or any of the Disabilities Acts, we say what the essential functions of the job are. Let’s say it’s a receptionist job and they have to be here. So, now you get the American with disabilities requesting, “I have an illness I need to be able to leave whenever to take care of my medical condition.” Well is that a reasonable request for accommodation? Probably not, because it’s too tied up to what they have to do. And you can say, "I can only accommodate this much, and I can’t accommodate this." In litigation later I can say, “Here’s the job description, and here’s why she’s not otherwise qualified with her disability.  

So, it gives you that backbone, and it helps guide those decisions when it’s time to let someone go. When you can document that you didn’t meet this job requirement, you didn’t have this job skill, and they come back and say, “Oh, you fired me because I complained about something or there was discrimination.” You can say, “No, here’s the objective test we used.” And it helps, it makes your lawyer thrilled. [laughter] It does help defend those claims later,because you’re using those criteria to make your decisions.

What to do If You Get Sued

PHYLLIS SMITH: Yeah, and I know that sometimes, if you’re listening now, you might be going, “Oh, legal mumbo jumbo.” But, really the fact is that this is stuff that you gotta do. It's so easy - we can go online, and we can find out this stuff, but it doesn’t mean we know how to execute it. I mean there’s just some things that you can’t do, and that an attorney needs to do for you. Right? And that’s part of planning for your business and budgeting for your business. So, let me ask you this then. So, if the worst happens and you get sued, what happens? What do you do? What’s the first thing you do?

NANCY GREENE: Seriously, the first thing you really do is 2 things. The first thing you do is lock down all your documents and your paper work so nothing goes missing. Because if you don’t have that, you’re really put in a hard place in defending. But the second is really you get on the phone with an attorney who’s gonna help guide you through that process, because even on a lower level small claims type court there’s a lot of issues there - a lot of deadlines there that you can mess up very easily in terms of not knowing if you have to show up or not. These are what you have to do. So, that’s really sort of step 1. If you don’t have a relationship with an existing attorney find one immediately.

  If you don’t have a relationship with an existing attorney find one immediately.  

How to Find the Attorney Who is Right for You

PHYLLIS SMITH: So, like anything not all attorneys are created equals. What are the things that someone can look for in hiring the right attorney - the right fit for them and their business?

NANCY GREENE: Right, so the things you’re looking for when you’re going out to hire an attorney is first that they do the kind of law that you need. You don’t want to hire me as a business attorney if you have a divorce matter. I’m not the right lawyer. Right? And you get that a lot, “Oh, I have an attorney and he does divorce and he was telling me this and that and this about my business.” And don’t get me wrong, a lot of divorce attorneys get to learn a lot about business law because it relates. Like I know a little bit of divorce law because it relates to what I do, but you really want someone who’s the bulk of their practice is doing what you need and can understand it.

You want someone who’s going to listen to you and take you seriously. You’re gonna want someone with experience because you’re gonna be paying, understand you’re gonna pay for that. So, the more years an attorney has, generally the more we charge. You wanna make sure also there is a personality fit. So, if you’re fairly laid back and you wanna get it resolved you don’t want to hire an attorney whose whole advice to you is fight, fight, fight, fight, fight if that’s not who you are and what you want. Right? Because it’s a very close relationship.

Your attorney is gonna see you at the worst times of your life, also the best, but really some of those worst times, and you need someone who can fill that adviser role. We're counselors at law, and that’s really important. You need someone who’s gonna talk to you in English, not mumbo jumbo. So, sometimes we can’t avoid using legal terms to talk to you, but then I need to break it down. So, I’ll go to a court hearing when my client will come, and my client will kind of go, “Huh?” And we’ll sit in the hallway and I’ll say, “Let me break down what actually happened,” because the judges and lawyers started talking judge and lawyer talk. It needs to be translated, and you need someone who’s not going to make you feel stupid when you ask that question.

PHYLLIS SMITH: Well, exactly and you have your own zone of genius as an attorney and the business owner has her own zone of genius, and you have to be willing to let go and let somebody else work and help you. That’s one of the things about entrepreneurs is we like to do everything, right?

NANCY GREENE: Yeah. [laughter]

How to Afford an Attorney, Even if You Don't Have the Budget

PHYLLIS SMITH: We like to have total control, and the fact is folks it could be that if you can’t afford an attorney maybe at some point you’re not charging enough for what you’re doing, but I wanna bring up one thing along those lines. Somebody is starting up, they have no revenue, they’re just starting their business, and I imagine that there’s 2 things certainly that they need to get. They need to have a lawyer and they need have an accountant.

NANCY GREENE: Right.

PHYLLIS SMITH: Right? And even if you do your own books you still need to have an accountant. So, what would be your advice to those startups who say, “I don’t have money, I can’t afford a lawyer.” How does that work in your industry to help people like that?

NANCY GREENE: So, there are a couple ways to do it. The first is yeah, you probably really can afford a lawyer. It may be that you don’t put one on retainer and pay them a set fee, but just if you need certain foundation documents. I do packages, right? You can get certain types of documents on a flat fee and you can do that. A lot of attorney’s will do that and work with you on a flat fee basis versus an hourly. Cause it’s always the hourly thing that everyone’s terrified about, “Oh, you’re going to charge me X amount of dollars on the hour.” And that could be lots and lots of money, but most of us will on documentation stuff  do flat fees. So, that helps and it’s sequential.

While there’s probably like 30 ideal documents with your business going forward, you don’t need all of them at once, but the ones you need you have to have. But just getting a form online and kind of cutting and pasting and saying, “I’m doing this business similar to my old employer and I can kind of modify theirs” can get you in a lot of trouble.

PHYLLIS SMITH: Well that’s good to know. I mean 30 documents, you just listed 3 before and I’m sure there’s plenty more you need to start up a business. So, okay bottom line is you need a lawyer. Right? We all need lawyer.

NANCY GREENE: Right.

You have to have to have an advisory team and that includes people like a lawyer, and like you mentioned Phyllis, an accountant. You want a bookkeeper, because it’s not the best use of your time, even if you’re a bookkeeper yourself, to do your own books. Right? You need a computer professional who can help keep updated on that, because you really don’t wanna be spending that time saying, "Is my malware up to date? You need someone who can fix that problem for you.

You need a business coach. Before I really became an entrepreneur and realized that as a lawyer I was an entrepreneur even when I didn’t realize it.  Having a business success coach out there is huge. I used to not give a whole lot of credence to that profession and I do now, so I apologize for my lack of faith before. But you have to have a business coach, because they’re going to help you build the business structure. No one comes into business knowing everything they need to be doing and you need a mentor. You need someone in your business, or a related business, who’s where you want to go next. So, you can learn from their wisdom and don’t always have to be recreating that wheel. That’s sort of your minimal advisory team that you need. Whether your one person or a 100-people business wise.

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