As a start-up business owner, I understand the attraction of finding a “good deal” for business needs. Many of which come at hours of frustration and education that would have been better performed by other service providers. I have worn the hats of a web designer, a receptionist, and countless others that are much more fashionable on other people. While many business owners are accustomed to wearing many hats (sometimes all at once) and taking the risk of having a not so fashionable website or blog, some of them also take the risk at losing it all by preparing, or worse not preparing at all, their own legal documents. Such is the story of Joe.
Joe and I recently met at a networking happy hour. Joe seemed like a sharp business owner; savvy, fun to talk to, had a great product and others were applauding his workmanship. As we began to learn more about one another, he asked if we could chat a bit more in a private setting. I gave Joe a card and we scheduled an initial consultation the following week.
Prior to our consult, I did a little homework to learn more about Joe and his company. I quickly realized Joe was a detail oriented guy. He had a very nice website, his social media posts were fluid, and he had great reviews across multiple platforms. Unfortunately, as I started exploring more nuanced details of his business, I began to notice some flaws in his state filed documents on the Secretary of State website. What clues did I find?
- The company was formed as an LLC in 2014 as a member-managed company
- The company did not own any fictitious names
- The registered agent was a “registered agent service”
During our consult, I shared these findings with Joe. Joe told me that he formed the company through an online document preparing website and he just “guessed” at what the answers meant. I dug a bit deeper and discovered:
- Joe did not have an operating agreement; or he did, but never signed it and had no idea where it was
- Joe did not register any fictitious names (although he was actively marketing 2)
- Joe had a business partner, Sally
- Joe and Sally did not have a buy-sell agreement or a way to fund a buy-out of each other’s interest in the case of death, disability, or disagreement
While Joe and Sally were running a great business on the surface, their decision to use self-help measures in their legal planning set them up for a high potential for personal liability if something went wrong in the company or their partnership.
After a lengthy two-hour consult, explaining the legal implications of these mistakes (amongst some others), Joe and Sally decided to hire Welch Law LLC to help reorganize the company, create a buy-sell agreement, create several much-needed service contracts, and subscribe to one of Welch Law’s monthly subscription plans so they could stay in constant contact with their new legal team.
Being a business owner means wearing a lot of different hats. It also means figuring out which hats are better suited for others and then adding those people to your team. Joe and Sally were fortunate they never needed to test their “www dot online legal experts” documents in a court of law, and we are fortunate to join another great team.