Archive for January 2013

FIVE REASONS YOU NEED A WRITTEN CONTRACT

January 28, 2013

” A verbal contract isn’t worth the paper it’s printed on.”  — Sam Goldwyn

Often clients tell us that they have reached a deal, shaken hands, and are ready to do business with a business associate.  While this may have been acceptable back when our grandfathers were in business, society has grown too large and complex to do business on a handshake alone.

A written contract serves many purposes, some obvious and some that most people never consider when entering into a business deal.  The top five purposes of a written contract are as follows:contract

1.  A written contract impress on the parties the significance of the commitments to which they are about to agree,

and the contract process helps define what is at stake.

2.  A written contract is the clearest record of what was agreed to between the parties.  Over time memories fade as to what was agreed.  A writing objectively states the terms of the deal.  This avoids “he-said vs. she-said” confrontations down the road.

3.  In some instances, a written agreement is absolutely necessary.  A law known as the Statute of Frauds provides that certain contracts (including the conveyance of real estate and agreements which cannot be performed within one year from the making) are not enforceable unless in writing.

4.  A written contract causes the parties to address and agree on issues which would otherwise be overlooked.  For example, without inclusion of an appropriate contractual provision, a prevailing party is unable to collect attorneys fees in the event a dispute results in litigation.

5.  A written contract forces the parties to contemplate the deal longer than it takes to just say yes.  This allows understandings to be flushed out and discussed among the parties and their attorneys, avoiding interpretations of a deal which may differ significantly.

Shaking HandsThe Law Offices of Lee A. Schwartz can assist you in drafting an appropriate agreement to meet your needs.   Please contact the Law Offices of Lee A. Schwartz at 631-777-2401 or by email at LAS@LeeSchwartz.com if you need assistance or have any questions relating to a contract you may need prepared or reviewed.

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Now that you survived the fiscal cliff, it’s time to plan for your future.

January 23, 2013

Whether you are a business owner or not, now that the fear of falling over the fiscal cliff has been eliminated, its time to focus on your future.  What are the legal issues that you might want to address in 2013?  Below is a suggestion of five things to consider looking at this year:

1. Review Your Employee Policies.   If you’re an employer, review your employee policies (and Handbook or Manual, if you have one) to make sure that they still reflect the policies being followed and to determine if any changes should be made.  Having a bad employee handbook can be harmful. Your company’s employee handbook shouldn’t describe policies and procedures that you don’t follow. It is not a place to describe your dreams for how your business ought to work. It is a place to describe the reality of how your business actually operates.

This year pull out your handbook or policies, sit down, and read them. Then update, edit, and delete as necessary.  Finally, distribute the revised handbook or policies to your employees and have them sign a form acknowledging receipt. Keep the form in your personnel files.

2.   Review Your Will.  The recently enacted American Taxpayer Relief Act of 2012 changed the Federal estate and gift tax laws.  Most Americans will benefit from theWill Signing.2 fact that the estate and gift tax exclusion was increased to $5,250,000 and that the “portability” election of exemptions between spouses remains in effect for decedents dying after 2012.  (If you don’t know what this is, you should probably be contacting me to find out.)  However, for those with taxable estates, the top tax rate increased in 2013 from 35% to 40%.

The new law provides some degree of certainty as to the Federal Estate Tax and allows for planing to fit the needs of each individual.  If you have a Will which was prepared prior to 2011, it should be reviewed to insure that there are no unintended consequences of any tax related provisions, such as credit shelter trusts.  Since the estate tax exemption for residents of New York State is still $1,000,000, a state estate tax of approximately $421,000 could be incurred upon the death of the first spouse, which tax can be deferred with proper planning.

3.  Update Your Shareholder/Partnership/Operating Agreement.  If you own a business or real estate and have a partner, it is critical to have an agreement in place with your partner or partners.  The type of agreement that is appropriate is dependent upon the type of entity.  If you already have an agreement with your partners, it is important to periodically review it to make sure that it accurately reflects the current business agreement between the owners.  Key issues to be addressed are buy-out rights, valuation issues, restrictive covenants, and obligations of indemnity between the partners for company liabilities.  If you don’t already have an agreement in place, make 2013 the year to do so.

4.  Consider Filing for a Tax Grievance.  With declining property values throughout New York, now is the time to make sure that your home or commercial property is not over assessed for real estate tax purposes.  The requirements to file vary depending upon the location of the property, as do the filing deadlinewhite houses.  For example, Nassau County requires that a tax grievance be filed by March 1.  The grievance can be handled by an attorney or non-attorney.  Aside from a small filing fee payable to the county or city, typically the fee charged by attorneys and companies that specialize in providing such services is a contingency fee – meaning that there is only a cost to you if you save money.  In most cases, you have little to lose and a lot to gain by filing for a grievance every year.

5.  Consider Whether You Need any New Agreements for your Business.  Depending on the type of business or industry you may be involved in, various types of written agreements are essential to avoid disputes and minimize liabilities later.  Further, a written agreement may serve to provide protections your business might not otherwise enjoy.  Some types of agreements to consider are as follows:

(a)     Agreements for key employees – Employment Agreements and Restrictive Covenant Agreements can be drafted to primarily protect the employer.

(b)     Confidentiality Agreements – such agreements are essential for employees, independent contractors, outside sales people or vendors who have access to valuable information of your company, including customer lists, product development and proprietary processes.

(c)      Standard Terms & Conditions for sales to customers – whether your business sells tangible products or provides services, among other benefits, Terms & Conditions are an effective way to reduce liability for warranty claims.

(d)     Independent Contractor/Subcontractor Agreements – to the extent your businesses regularly utilizes the services of third parties, a written agreement setting forth the obligations of such third party to you and the customers of your businesses is critical in the event of a dispute.

As the saying goes, “Don’t put off until tomorrow what you can do today.”  If you have any questions relating to the suggestions above, or need assistance in implementing them, please contact our office.