Tag: How to run your business smoothly

June 9, 2014   Posted by: Margarita Smirnova

BUSINESSES DEALING WITH ON LINE DEAL SITES!

At one point, sooner or later, you, as a business owner or business principal will consider offering your services on a Groupon like or an on line deal sites to promote your business and show potential customers your service.   Forbes’ article Are Daily Deal Sites Like Groupon Still Worth It? points out the wariness of the consumer.  In the article, a writer didn’t use her coupon.  She stated that customers became disillusioned by the deals and burnt from experiences.  She ended her article with a list of great advice for the buyers.  The list is great to connect with customers and figure how to make your business last.  The list below will take it a little further and list issues that businesses may deal with when working with companies that providing on line deals.  Keep in mind that the list is not exhaustive and not all companies are the same.

1.     Deals are contractual agreements.  When dealing with a corporation that offers an on line deal you will be provided with an already prepared contractual agreement that contains multiple clauses.  One of the most commonly used clauses is expiration date.  Each contract varies.  In 2012, Groupon, Inc. paid $ 8.5 million and settled a class-action lawsuit, which alleged illegal expiration dates when customers didn’t use their vouchers.  See, In re Groupon Inc. Marketing and Sales Practices Litigation, 11-MD-2238, U.S. District Court, Southern District of California. The result affected businesses that now must accept monies customers paid even after the deal, sans the discount.

When facing with on line deal like contract, this is the time to review every clause very carefully.  It is important to understand the company’s motive, which is to sell.  This means what is said is not always what is in writing.  One Boston magazine offered an on line deal to a business where the salesperson verbally offered a deal-type scenario that consisted the company would provide the deal on their website and keep 100% of proceeds from the deal while the business would provide a service to the customers who would buy the deal in exchange for the publication.  When they sent the contract to the business, it was shocking to see that no deal-type scenario was included anywhere in the contract.  In fact, the business would be solely responsible for the publication.

2.     Cancel the contract clause.  Deal-type companies retain the right to cancel the contract with the business at any time without warning or explanation.  That means whatever efforts you made to prepare your business to deal will go to waste.  They also can change a day and a time of the without being liable to you.  The contract can limit the business’s right to cancel which renders the clause illegal when one sided.

3.     Another big one is condition of approval clause.  If the business isn’t careful and signs this clause, the company can get the right to strip you of your right to condition for approval, which I think, is atrocious.  You want to see your final version of advertisement before it goes out in print or on line.

4.     Watch out for your own property rights.  One company wanted to retain rights to own and sell to third parties of businesses’ pictures or images and trademark perpetually.  This means that not only they can use your images that you’ve spent time, money and energy to obtain and belong to you, but also to sell them to whoever they please forever.

5.     Customer dissatisfaction.  All on line deal like companies contain limitation clauses in their contracts.   They also will make sure to be indemnified from further liability and the responsibility will fall almost entirely on the business.  It is important to be aware what type of liability the business will absorb.

Groupon like companies retained attorneys to draft contracts for them.  There is nothing wrong if you get help from one.

Written by Margarita Smirnova, Esq.

If you have a specific question relating to your business or any other legal questions, please contact Margarita

Call: (617)398-7482
E-mail: margarita.smirnova@gmail.com
This post is for informational and educational use only and does not create attorney-client relationship.
no comments posted in: Business Law   |   Commercial Law   |   Litigation
October 25, 2013   Posted by: Margarita Smirnova

BUSINESSES PARTNERSHIPS ARE COMPLEX RELATIONSHIPS

 

The U.S. businesses consist of sole proprietorships or various forms of partnerships and corporations.  It’s not unheard of that solo businesses enter business ventures with other businesses.  Due to the tough economy, more and more business partners join business partnerships with each other than before to survive.  A business partnership union can be compared to a marriage.  Like in a marriage, a business partnership has a honeymoon period filled with well-meant, and perhaps, not-so-well-meant promises.  Then, there is a drudgery of ins and outs of a daily and weekly workload and activity with potential lack of communication may lead to contempt and breach of respect and/or trust.  Does it sound too familiar?  Yes.  That’s because it happens all the time.  Luckily, there are ways to prevent a fall out, and in case if it’s too late, peacefully depart.  Similarly to a good marriage, a personal responsibility and entering the business partnership with the idea that nothing in this world is permanent is the key to success.

There are many issues that can arise among partners and wreck a business partnership.  For example, a closed company shareholder dispute over under performance, a lack of sufficient capital and an increase in business expenses, a breach of fiduciary duty, among other things such as including but not limited to business debt collection and/or personal disputes.

A scenario where business partners are partnering with each other instead of hiring happens all the time.  Sharing household tasks is not an unfamiliar approach.  In short, two or more partners with different set of skills agree to make an input and be responsible for separate aspect(s) of the business.  Sometimes one partner’s particular or unique skill or service in the beginning is what brings the company to its success.  Later, someone could be hired instead of him.  At one point, one of the partners may think that hiring someone else with the same set of skills would be a cheaper alternative than to retain the original business partner leading to a rift in the relationship affecting the daily business flow.  Perhaps, communicating would have helped.

There are many issues that can arise among partners and financial outcome be at stake.  For example, a conflict may arise in a closed company shareholder dispute may arise over an under performance, a lack of sufficient capital and an increase in expenses.  That can lead to a breach of fiduciary duty, and unfulfilled promises and wreck a business flow.  In addition, a simple business debt collection suit by a creditor or personal disputes can lead to a prolonged grudge.  This is exactly what happened in one of the cases in Massachusetts.  See, Weiler v. PortfolioScope, Inc., 83 Mass. App. Ct. 216 (2013).

In Weiler, the business structure involved a complex array of partnerships among companies and individuals making separate contractual agreements and obligations.  The outcome resulted in securities regulations preempting over contractual agreements between the parties because there was a properly secured and timely perfected creditor.

Milton Weiler (Weiler), the plaintiff in this case, was a President and CEO of the PorfolioScope, the defendant.  Weiler developed a certain portfolio that became a part of PortfolioScope, Inc. (PortfolioScope).  PortfolioScope is an entity formed when formerly named Spencer Trask acquired Computer Aided Decisions (CAD) and CAD Research along with Plaintiff’s, among with Weiler’s, software.  In 2008, PortfolioScope sued iFlex Solutions, Ltd for the theft of trade PortfoliosScope’s secrets software.  The case with iFlex Solutions Ltd. settled and PortfolioScope was to receive a lump-sum payment in the amount of $10 million.  However, in 2002, Weiler resigned leading to replacing of the CEO within the company.  Through a stock option purchase and the sale agreement with PortfolioScope, Weiler, in exchange for the sale of his portion of ProtfolioScope, retained the right to five percent (5%) of its net proceeds received in connection with the iFlex Solutions, Ltd.

Plaintiff argued that PortfolioScope breached the agreement with the plaintiff to pay (5%) of the proceeds from a settlement related to a pending lawsuit between PortfolioScope and iFlex Solutions.  See, Weiler, at 218.

The main issue was whether an agreement between the plaintiff and the defendant stating that the plaintiff was entitled to 5% of defendant’s net proceeds in connection with the third party litigation gave the plaintiff a priority over a secured creditor who had a preferred his claim.  The Trial court held that the agreement gave Weiler the priority of payment and said that the defendant “was required to pay because the agreement did not mention any creditor, secured or unsecured.” See Weiler 218-223.

The Appeals Court of Massachusetts, however, disagreed with the trial court and interpreted the effect of the contract between the parties differently.  The Court said that the payment was simply one of several parts of the consideration for the sale of his stock options back to the company…  The court held that “PortfolioScope lacked authority to encumber collateral preciously securitized in favor of the creditor…”  “The resolution of priority conflicts is governed by the general rule “first in time, first in right” See Weiler 225-226.  Because the creditor did not subordinate his interest to Weiler, “Weiler was an unsecured creditor, whatever the nature of his interest in the settlement proceeds, was not superior to other creditor who had their interest secured.

Communication is crucial.  Comparisons with marriage aside, writing is a great communication tool.  While its not always perfect it can show the meaning among the parties.  A well drafted agreement between partners could divert a disaster by laying out possible creditors.  It can also minimize the possibility of misinterpretation and help to avoid losses and costly litigation.

 

Written by Margarita Smirnova, Esq.

If you have a specific question relating to your business, please contact Margarita

Call: (617)398-7482

E-mail: margarita.smirnova@gmail.com

no comments posted in: Business Law   |   Commercial Law   |   Litigation
July 15, 2013   Posted by: Margarita Smirnova

DANCING AND THE LAW

Dancing is beautiful.  Dancing takes us in a different world full of glamor, feelings, fashion, and a holiday.  People go to learn dancing for various reasons and take different dance classes.  While there are different types of dances, it is important to keep in mind that running a dance studio business is providing service where dance instructors give dance instruction to their students.

From legal point of view, similar to many businesses, a dance studio owner should think of protecting studio’s assets.  Some of the most important assets are music and video equipment, a music collection, instruction materials, teachers and studio’s name.   From my personal experience as a professional Ballroom and Latin dancer, the name and its reputation are probably one the most valuable assets.  Generally, the name is earned through dancing community by competing, teaching, and judging and is very respected for years to come.  If done right, they can be protected.

Some of the things to keep in mind when running a dance studio.  First, to run a successful dance studio, the owner has to consider incorporating the studio as business to limit liability and bring structure for the business to run smoothly.

Each state has different rules and regulations governing incorporation process.  For example, to form a Corporation, New York, under the Section 301 of the Business Corporation Law,  requires a special taxation for shares that the corporation is authorized to issue which must be paid at the time of formation of the corporation.  To form LLP, New York, under Section 121-201 of the New York State Revised Limited Partnership Act, requires the filing of the certificate of limited partnership, a limited partnership (LP) plus publication within 120 days.  While Massachusetts doesn’t require the above requirements, the M.G.L. Chapter 156D controls all corporations in Massachusetts, which means that a corporation in Massachusetts is still required to submit its annual report with the appropriate fee.  There are cheaper ways to incorporate in other states.  Dance studio owner should consider the location prior incorporation where s/he wants to conduct the business prior incorporating.

Second, the provisions of the lease and its renewal are important to protect the studio from losing its location.  From my personal experience, many real estate developers/landlords do not think of dancers as business savvy people.  Dancers are considered to be artsy.  Often, verbal promises are not included in integrated written agreements.  This can make it difficult to run a profitable studio smoothly.  Also, moving studio’s location a lot may not be beneficial and should be kept to the minimum.

Third, is insurance.  Insurance is here to protect our property from many types of damage; environmental and/or human made.  Also, insurance should cover clients’ possible injuries to minimize costly litigation.  There are waivers available but they may not protect your studio 100%.  In some places, waivers are not valid or partially valid.  In New York, the waivers are valid for instructional purposes only and if drafted properly.  That means that your studio may still be liable for injuries that occur on the premises.  In Massachusetts, “the issue of waiver is for the fact finder.  When the facts are undisputed, the waiver is a question of law.”  See, Linda Coal & Supply Co. v. Tasa Coal Co., 416 Pa. 97, 101 (1964).  Also, it is an affirmative defense.  See, Sharon v. City of Newton, 437 Mass. 99 (2002).  Under Mass. Gen. Laws, Ch. 93A protects from unfair and deceptive business practices.  “A statutory right or remedy may be waived when the waiver would not frustrate the public policies of the statute and the court “ordinarily would not effectuate a consumer’s waiver of rights under c. 93A”.  See, Canal Electric Co. v. Westinghouse Electric Corp. 406 Mass. 369 (1990).

Fourth, handling employees is just as crucial.  There is an employee’s contract, immigration that may require sponsorship, human conflict, termination, and a non-compete agreement issues.

Fifth, sometimes there is an occasional encroaching on dance business by other dance studios that can bring a lot of frustration and litigation.  A dance studio owner, can address these issues timely and avoid further losses down the road.

Sixth, as of late, Internet and media took a whole different spin on how the studio appears on-line.  Domain name, hosting, visibility/ranking and copyright of videos along with music and its combination came to play an important role in dance business industry.

 

Written by Margarita Smirnova, Esq.

If you have a specific question relating to your business, please contact Margarita

Call: (617)875-8663

E-mail: margarita.smirnova@gmail.com

 

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