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Thursday
Jan102002

12 Ways to Avoid Legal Problems in the New Year

Most businesses keep their fingers crossed and hope they don't have legal problems. By doing so, they fail to put simple strategies in place that can prevent problems and sometimes they even fail to take actions that could benefit their business out of concern for unknown legal liabilities.

Business lawyers are just as much to blame as business people for this reactive approach. Most lawyers wait for a client to call them with a problem and then do their best to solve the problem after the fact. How much better would it be to avoid the problem altogether in advance!

For you proactive types that would like to avoid problems and seize business opportunities, we have 12 ways you can prevent legal problems in 2002.

January – Hold an Annual Meeting
Whether your business entity is a corporation, a limited liability company a partnership or even a sole proprietorship, you should hold an annual meeting once a year with your accountant and your lawyer. First, there are formalities that need to be observed in order to ensure that you receive the tax treatment and legal protections for your form of organization. There are also certain actions that you must document appropriately in order to prevent problems. An annual meeting can be more than that, by discussing recent changes in the laws, challenges faced by your business and your plans for the future, your accountant and lawyer can help you avoid problems and seize new opportunities.

A lot of business people go somewhere, write some things down on a piece of paper and call it an annual meeting. We have seen a lot of problems result from this type of "annual meeting." They can fail to observe all the necessary formalities and put their business organization at risk, they can fail to properly document actions they have taken and they do not get the benefit of discussing new laws, current challenges and future plans. Do it right, commit that you will call your lawyer to schedule an annual meeting before the end of January. Better yet, do it today!

February – Write/Update Your Employee Handbook
If properly written, an effective, up-to-date employee handbook can help prevent claims by employees and, in the event you are sued, provide you with legal defenses. An out-of-date handbook or a handbook with provisions that seem appropriate but are traps for the unwary can be a legal liability for your business. It is better to have no handbook than an outdated handbook or one with legal traps.

Time and time again we see business people spend massive amounts of their time trying to write handbooks on their own, usually borrowing someone else's handbook as a guide. They have no idea whether the handbook is out-of-date or contains legal traps. We also see various non-legal vendors trying to pedal handbooks that needlessly tie the employer's hands as if the quantity of content is more important than quality.

To help you develop and maintain an up-to-date employee handbook, we developed a program where we can create a customized employee handbook for your business in less than two weeks with about two hours of your time. We then track the provisions in your handbook and provide you with an updated handbook each year.

March – Start A Supervisor's Log
Readers of LegalBriefs have seen me write about this before. Maintaining spiral notebooks with dates and entries of things that occur during the day, notes of meetings and comments on employee conduct is a tremendous tool for proving you are correct in the event of any dispute. It can also be a great management tool. Buy a spiral notebook, put the starting date of the log on the cover with a bold felt pen, make notes until it is full, put the ending date on the cover, save the log on a bookshelf and begin a new log.

April – Remind Your Employees of Your Harassment Policy
The United States Supreme Court has provided some defenses to employers if they take steps to prevent and correct sexual harassment. Since you wrote or updated your employee handbook in February, you should have an up-to-date sexual harassment policy. Once a year, you should remind your employees of that policy. Commit to sending out this reminder in April and then mark in your calendar to send similar reminders in April of each year that follows.

May – Write/Update Your Estate Plan
Not everyone needs a will. Of those that need a will, 70% die without having made a will. Don't let that happen to you. Promise yourself that you will take care of this task before you leave for your summer vacation. We enjoy helping people with their wills. The most common reaction after the wills have been signed is a sense of relief. We want you to know the feeling of taking care of this vital task.

June – Review Your Insurance Coverage
Are you adequately insured? Are you covered for the risks that you could face? Are your coverage amounts adequate for the nature of your business, the value of the property used in your business and the value of the assets you have to protect? June is a quiet month because people are thinking about the activities of summer. Use this quiet time to schedule an hour with your insurance agent to review your insurance coverages.

July – Calendar Contact Renewal Dates
From your postage meter, to your service contracts, to leases for property you rent, your contracts contain specific provisions for either renewing or terminating the agreements. If you are not aware of those provisions and do not follow them, you can be surprised by the results and the costs that you will incur. In July, gather these documents, look at the renewal provisions, list all of them in one document you use as a management tool and mark all of them on the appropriate calendars.

August – Develop a Business Succession Plan
You took care of your estate plan before your summer vacation. Once you return from vacation, you should think about a "Business Succession Plan." If something happened to you, what should your family and your employees do to keep your business afloat and preserve the value of your business for your heirs? Don't worry, we have tools that can help guide you through this process. This is a cutting-edge preventative law tool that will be worth its weight in gold if it is ever needed.

September – Perform an Employment Practices Audit
You may have heard me say that the most dangerous thing a business can do from a legal standpoint is hire employees. By scheduling an annual employment practices audit, you can learn of problems, correct those problems, identify preventative legal strategies and take comfort in knowing that you are solving any employment problems you may have.

October – Review Your Performance Appraisal System
Lots of businesses say they conduct employee reviews, a few actually conduct reviews regularly but very few do it correctly. Learn the 8 tips that will ensure your performance appraisals are an effective management tool that will not subject you to legal liability.

November – Spin Off Your Real Property Into A Separate LLC
If you own the real property used by your business, there may be tax and legal benefits to transferring the property into a separate limited liability company. Your accountant and lawyer can discuss this with you in more detail. At the very least, you should discuss this with your advisors to determine whether you will benefit from transferring your real property.

December – Review Your Standard Contracts/Sales Agreements
Every business has standard credit applications, invoices, purchase orders, sales agreements and other documents used in their business. When were yours drafted? When were they last reviewed? Do your documents reflect the latest changes in the laws and current legal prevention strategies? Review these documents each December so that you can begin using any revised documents at the start of the new year.

We are here to serve you throughout the new year. Please feel free to call us at any time if you would like to discuss ways you can avoid problems and seize business opportunities throughout 2002.

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