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Nawbo Presentation 3 18 10 [Compatibility Mode]


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Nawbo Presentation 3 18 10 [Compatibility Mode]

  1. 1. How to Protect Yourself from the  H t P t tY lf f th People you Trust p y Presented by:  
  2. 2. Cast of Characters Best Friends • Alice • 52 • Hair stylist i li • Married (before  business started) ©Mad Artists │
  3. 3. Cast of Characters Best Friends • Betsy • 51 • Sh Shampoo  Specialist  • Married (after  business started) ©Mad Artists │D ©M d A ti t │ ti
  4. 4. Cast of Characters Best Friends • Caroline • 47 • Hair sweeper i • Unhappily  married to Dave ©Mad Artists │
  5. 5. Cast of Characters: Bookkeepers Cast of Characters: Bookkeepers • Dave • 43  unhappily      married to  married to Caroline ©Mad Artists │ • Bookkeeper for Friends  Forever
  6. 6. Cast of Characters: Bookkeepers Cast of Characters: Bookkeepers • Elmer • 47 • Unmarried i d • Betsy’s Cousin • Replacement  ©Mad Artists │ p Bookkeeper
  7. 7. Facts:  Friends Forever Facts: Friends Forever • Alice Betsy and Caroline long time friends Alice, Betsy and Caroline, long time friends,  started a business together ten years ago.   Since Alice was talented at cutting hair, Betsy  Since Alice was talented at cutting hair Betsy was the queen of shampoo, and Caroline was  a world class sweeper, they decided to open a  a world‐class sweeper they decided to open a salon – Friends Forever.   ©Mad Artists │ ©Mad Artists │ ©Mad Artists │
  8. 8. Be Prepared:  The Documents Be Prepared: The Documents • Operating Agreement – Operating Agreement – The governing document for your Company   • Manager s rights and duties Manager’s rights and duties • Financial interests • Check writing  g • Loans to company • Succession planning
  9. 9. Be Prepared:  The Documents Be Prepared: The Documents Employment Agreement governs the terms  Employment Agreement – governs the terms and conditions of an employee’s employment  with the Company. with the Company Non‐compete Non‐solicitation N li i i Confidential information Paid time off
  10. 10. Be Prepared:  The Documents Be Prepared: The Documents • Business Succession Plan – ensures the Business Succession Plan ensures the  smooth continuation and success of the  Company in the event that the owner retires,  Company in the event that the owner retires becomes disabled or passes away. – Buy/Sell – Compensation – Insurance – Estate Plan 
  11. 11. Facts:  Friends Forever Facts: Friends Forever • Friends Forever was an immediate success! Friends Forever was an immediate success!  • They hired Dave  to do their books,  d h i b k as none of them had  previous experience in  owning a business.  Friends Forever was  owning a business Friends Forever was profitable and everyone was happy.  Until…
  12. 12. Hypo 1: Divorce Hypo 1: Divorce • Caroline and Dave unhappily Caroline and Dave, unhappily  married for too long, finally  decided they couldn t take it  decided they couldn’t take it anymore.   • Dave contacted the local Dave contacted the local  shark lawyer and filed for  divorce.   divorce ©Mad Artists │
  13. 13. Hypo 1:  Divorce Hypo 1: Divorce • If Friends Forever had planned: If Friends Forever had planned:   – Minimize litigation – Maximizes the parties’ control Maximizes the parties control – Gives the Court a roadmap 
  14. 14. Hypo1:  Divorce Hypo1: Divorce Friends Forever failed to plan.  Now what? Friends Forever failed to plan Now what? • Business valuation can be complex and costly • Invasion of company privacy i f i • Who stays, and who goes?
  15. 15. Hypo 1:  Divorce Hypo 1: Divorce • Legal Issues for Friends Forever in the event of Legal Issues for Friends Forever in the event of  a  partner’s Divorce:   – Discovery – coming up with a value for the Discovery – coming up with a value for the  business for purposes of dividing your assets. – Dave was doing the books for Friends Forever Dave was doing the books for Friends Forever – Dave is an employee – will he stay on?   • Ohio is At‐Will Ohio is  At Will • Employment Agreement
  16. 16. Hypo 1:  Divorce Hypo 1: Divorce • Alternative Dispute Resolution Alternative Dispute Resolution  – Less complex  – Fairness – Agreement between parties means less disruption  to business to business
  17. 17. Hypo 2:  Death of a Partner Hypo 2: Death of a Partner ©Mad Artists │ "© John Takai | " After the dust from Caroline and Dave’s divorce had settled, Friends Forever got back to business, albeit a little lighter in the bank account than it was prior to the divorce. One day, Betsy and Caroline got a phone call. Alice was at home styling her own hair (for once!), when she met her demise in a very unlikely, and very tragic, hairdryer incident. Betsy and Caroline did not kno what to do know hat do.
  18. 18. Hypo 2:  Death of a Partner Hypo 2: Death of a Partner • If Friends Forever had planned:  – Smooth transition of the business Smooth transition of the business  – Time to mourn rather than to think about how the  business will continue. business will continue.
  19. 19. Hypo 2:  Death of a Partner Hypo 2: Death of a Partner • Friends Forever failed to plan Now what? Friends Forever failed to plan.  Now what? • Do you want to be in business with your partner’s  estate? • What if the business cannot continue without the  decedent? ©Mad Artists │
  20. 20. Hypo 2a:  Disability of a Partner Hypo 2a: Disability of a Partner WHAT IF… your partner does not die, but is  WHAT IF… your partner does not die, but is disabled – • Disability provisions in your governing Disability provisions in your governing  documents. • What type of provisions do you want to include? What type of provisions do you want to include? • Salary continuation? • How long are you going to support your disabled  partner?
  21. 21. Hypo 3:  Theft! Hypo 3: Theft! • After Caroline and Dave’s divorce, and Alice’s  death, Caroline and Betsy needed a new  d th C li dB t d d bookkeeper.  Luckily, Betsy’s cousin, Elmer,  was a former accountant who was looking for  f t t h l ki f work.  Elmer began to do the books for  Friends Forever, and it appeared he was doing  Fi d F d it dh d i a good job, until. . . 
  22. 22. Hypo 3:  Theft! Hypo 3: Theft! • Clients say credit cards were double charged • Elmer assured everyone it was a mistake El d it it k • Then, Betsy gets strange bills in the mail • Elmer stole from Friends Forever clients, AND  signed up for (and maxed out!) credit cards in  Betsy’s  name! ©Mad Artists │
  23. 23. Hypo 3:  Theft! Hypo 3: Theft! If Friends Forever had planned. . .  If Friends Forever had planned. . . • Develop policies/procedures with advisors • Accountants  • Attorneys  • Insurance Agents • Bankers • What to do after the fact • Call attorney for advice on legal responsibility  • Call police • Contact insurance carrier
  24. 24. Meyers, Roman, Friedberg & Lewis Meyers, Roman, Friedberg & Lewis
  25. 25. Thank You! Thank You! Visit us on the web at