Nonprofit Bylaws

​Forming a business entity like an LLC or a corporation typically provides limited liability protection to the owners. But in certain situations, you can find yourself personally on the hook for the debts and obligations of the business. This week we’re discussing the legal concept of “piercing the corporate veil” and why it’s used so often against small business owners.

If you’ve worked hard to build your client or customer base, or even put significant time and effort into training your employees or recruiting the right subcontractors, you probably want to protect that investment. Non-solicitation agreements are typically used by businesses of all sizes to ensure that their employees and subcontractors will not solicit (or run off with) the company’s customers, clients, or even other employees or contractors that the company has worked so hard to find and develop in the first place. ​

If your business has a web presence (and in the 21st century, you really should), then you probably need a privacy policy on your website. Several relatively recent laws require business websites to post a privacy policy, but these laws aren’t universal in their applicability, especially when it comes to small businesses. Complicating matters, this area of the law is developing and changing rapidly.

According to a recent survey, customers are not only starting to care about their online privacy, but they are also willing to take action to protect their privacy, even going so far as to switch businesses or service providers because of their privacy policies. This means your customers are increasingly likely to want to know what data they are giving up when they interact with your business and what your business is doing with all that data in the first place. In this post, we’ll talk about the legal requirements for your website privacy policy: What should be included in your privacy policy? What are some best practices for keeping your privacy policy up to date?
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Small businesses and non-profits have had a lot to worry about this year. Not surprisingly, many small business owners and non-profit directors have been asking about ways to protect themselves from lawsuits related to COVID-19. Will a customer or employee try to sue us if they get COVID? Will a waiver protect us from this type of litigation?
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In response, the Ohio General Assembly passed H.B. 606 “to make temporary changes related to qualified civil immunity for health care and emergency services provided during a government-declared disaster or emergency fund and for exposure to or transmission or contraction of certain coronaviruses.” So what does this mean for small businesses or non-profits who are wondering about their potential liability if someone claims they were exposed to COVID-19 at your place of business? And what other liabilities are out there waiting to trap the unwary?

You’ve put together your website or app offering your Great New Service™, but now you’re trying to figure out the dreaded Terms of Service. Everyone clicks the box to indicate they agree before signing up for the service, but no one really reads these absurdly long agreements. What do you really need to put in your small business’s terms of service, and, perhaps more importantly, why do you need one in the first place?

Just like you shouldn’t do business on a handshake, you shouldn’t operate your business on a handshake either. But too many entrepreneurs regularly go into business without any formal documentation. If you have business partners, so-called “silent” investors, or took money from friends and family, I cannot stress enough how important it is to have the terms of these partnerships documented in a formal written agreement. Otherwise, it’s just a dispute waiting to happen.

If I had a dollar for every time a client or prospective client told me that their business partner/best friend/family member would never sue them, I’d be writing this article from a beach in the Caribbean right now.

​There are a few critical questions that every company operating agreement* should answer.

​A licensing agreement is a contract in which you, the licensor, gives someone else, the licensee, permission to do something that they otherwise would not have the right to do. There are many situations in which a small business might use a licensing agreement:

• If your business is only reaching customers in a particular region, you might enter into a licensing agreement with another business to sell your products or services in a different region. 
• If your business develops software, you are typically giving end users permission to use the software in a particular way, but you are not selling the underlying code that makes up the software. (This is also true of businesses that operate under a software as a service or SaaS business model.)
• If you create content for others, you have to decide whether you are giving up all of your rights in that content, or simply giving your client permission to use that content (in which case, you retain the right to re-use that content with another client).
• If your business has a proprietary process or patent rights in a particular technology, you might monetize that confidential information by giving another business the right to use that confidential information.
• If you franchise your business or offer a business opportunity, you are licensing your brand for someone else to use.

​While licensing agreements need to be customized to fit your particular business situation, there are some common terms that most licensing agreements should address.

​You’ve been diligently pursuing your marketing plan, and your dream client is finally interested in working with your business. You take some time to hammer out the details, maybe trading multiple emails and phone calls, sometimes even text messages. At some point, the haggling concludes and you get to work providing your service. At this point, one of two things often happen:

​If you’ve ever found your business in one of these situations, you’re definitely not alone. These situations illustrate exactly why you need to use written contracts in your business and not just rely on a handshake and a few emails. 

This week we continue our series on raising money from investors. In Part 1, we covered why this complex area of law matters, even if you’re just raising money from friends and family. Complying with securities laws requires that you register at both the federal and state level or comply with an exemption (again, at both levels). In Part 2, we explained the common exemptions to registration at the state level. In Part 3, we looked at the common exemptions at the federal level. As we explained there, some of the federal exemptions leave quite a bit of room for interpretation, causing some businesses to rely instead on certain “safe harbor” provisions. 

Just what are the "safe harbor" provisions? Can you ever advertise that you're seeking investors? And is an offering document really necessary?