Hurley Stanners & Matsko LLC

Business, Probate, Tax, Real Estate & Entertainment Law Attorneys

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10 Things Every Business Person Should Know About Contracts

An Employee Handbook sets out the employer’s general rules regarding employment,  including benefits, disciplinary and termination issues.  Employers are not required to put their employment rules in writing.  While an Employee Handbook sets out the policies or practices of an employer, it generally does not constitute a contract with the employee.  What this means to you is that you should not assume that company policies will not be changed at some time during your employment.  An attorney can advise you whether an Employee Handbook has created contractual rights which an employee can enforce during or after the termination of employment.

An Offer Letter is the letter sent to an employee advising them that a job, with certain defined duties and compensation, is being offered to them.  The Offer Letter must be carefully reviewed.  The terms should include salary, sick and vacation time, pension and other employee benefits and any other term which you negotiated.  Generally, an Offer Letter does not offer a job for life nor for a set term.  Rather, it merely states the terms which will exist while you are employed.

An At will employee is one that can be terminated at any time by an employer or employee without any reason.  Most people in the United States are at will employees.

It is your job to understand the terms of any contract in which you enter.  This can not be said strongly enough.  This means that acronyms, industry terminology and accounting terms must be used consistently and must be defined.  In particular make sure that any commission or bonus formula can be calculated based on information which the employer has at hand.

You must end up with a signed copy of any Offer Letter, Contract or Confidentiality or Non-Competition Agreement which you enter into.  If your employer does not sign an agreement then it is not bound to the  written terms.  You may argue that an oral agreement exists but this is harder to prove.

You should keep a copy of your company Employee Handbook, Offer Letter and other Company memos and important papers related to your employment.  These are best kept at home.  If you have not kept a document and need to provide it to an attorney to review your rights you can seek a copy of your records.  Under law in Illinois you can access a copy of your personnel records by requesting a copy.

If your employer does not pay you salary, commission, bonus or any other sum when it is due you should remind your supervisor verbally and then in writing that the payment is past due.  Do not wait until more money is due you.  By law, an employer must pay wages by the next regularly scheduled pay day.  Wages include salary, sick pay, vacation pay, bonus and commission monies which have accrued.  If your employer does not pay you, the Department of Labor has authority to investigate claims of violations by employers.  Alternatively, a lawsuit may be filed.

Under Illinois law an employer has to pay you all of your wages which have accrued prior to termination. Payment must be made by the next regularly scheduled pay day.  In addition, if a written or oral contract exists rights under the contract may also be sought.

Confidentiality, Non-Compete and Non-Solicitation Agreements each restrict an employee  from taking certain action which is competitive with the employer’s business.  Generally, a Confidentiality Agreement restricts an employee from using the confidential or trade secret information of the employer, a Non-Competition Agreement restricts an employee from working in any business which is competitive with the employer’s business and a
Non-Solicitation Agreement restricts the employee from soliciting or doing business with the customers of his  employer.  Not all agreements are enforceable even if you signed them.  This means that you should always seek legal assistance in understanding your rights and obligations under any agreement which you have signed.

An employee may be eligible for severance payments if the employer had a company policy which granted severance or a written employment contract exists which provides for severance payments.  Employers will also often give severance benefits where they want to bind an employee to an obligation not originally restricted.  For instance, an employer may want protection against the prospective competitive activities of an employee who knows confidential information or could take away a substantial amount of business and may offer a flat sum in one or more installments to insure its business is protected.  A Severance Agreement must be carefully reviewed to make sure that salary, bonus or other payments due to the employee are not being waived and that the employee’s restrictions are no broader than necessary.

Protecting Your Property and Healthcare as You Get Older

Throughout history, humans have been the masterminds behind the building of 300 foot pyramids in Giza and have sent numerous astronauts into space.  Yet, human experience has taught us that even some of the most brilliant minds were prone to making mistakes and lapses in judgment as they got older.  Winston Churchill and Ralph Waldo Emerson are some of the notable examples of people who suffered from dementia and who were prone to making mistakes at an older age.

No one has the ability to stop “father time” from taking its course as we get older and affecting how we think and make day to day decisions.  In this Article, we share our suggestions for simple cost-effective ways for adequately protecting one’s property and health care decisions as one becomes older.

1)      Protecting your Property

a)      Power of Attorney  For Property

Everyone should have a Power of Attorney to protect their property in the event that they become temporarily or permanently incapacitated or disabled.  Generally speaking, a Power of Attorney allows you to appoint someone (usually a family member or close friend) to make property and financial decisions for you on your behalf.  You can specify in the Power of Attorney when the rights under the Power of Attorney will begin and end (if before death), as well as control other aspects of the Power of Attorney such as how to amend it.  Normally, a Power of Attorney will specify that a doctor or a court must determine incapacity before the family member or friend can act for you.

Specifically, in Illinois, A Power of Attorney For Property allows your agent to do the following for you: (1) engage in real estate transactions, (2) perform financial transactions for you or your business, and (3) participate in litigation for you on your behalf.  The duties of the agent can be as limited or broad as desired.  In sum, a Power of Attorney will assist your family and close friends in managing your business and personal affairs if you become seriously incapacitated.  It gives you, as opposed to the court system and others, more control over your life.

b)      Joint Tenancy for Property and Bank Accounts

Titling your real estate property as a “joint tenancy with a right of survivorship” (which often consists of two or more people who jointly own the property) is a great way to ensure that your interest in the property will automatically pass to another upon death, without being tied up in any lengthy legal “probate” process.  The property will automatically pass upon death to the surviving owner(s).

Similarly, unless you have created one or more trusts with an estate planner, it is wise to have your bank account and other investment accounts be jointly owned and titled as “joint tenancy with a right of survivorship.”  This also avoids the probate process as whatever is left in an account after one’s death automatically becomes the other account holder’s personal property.  This account titling ensures that your money is going to the individual(s) you desire and it can provide a huge relief to one’s family in obtaining necessary funds to pay for funeral expenses and other costs.

2)      Protecting your Health Care: Power of Attorney For Health Care

Regrettably, some of us may have experienced difficulty in making health care decisions for a spouse or loved one in the event of an emergency when they are incapacitated.  Fortunately, like a Power of Attorney For Property, a “Power of Attorney For Health Care” is a legal document in Illinois that gives a family member or serious friend the power to make certain health care decisions for you.

A Power of Attorney For Health Care provides a trusted agent (usually a close family member or friend) with the ability to make health care decisions for you in the event of an emergency or disability.  This power to make personal health care decisions for you will be effective to the same extent as though you made the decisions yourself.  The health care powers that may be delegated to an agent include all powers that you have such as (a) the right to be informed about your health care and (b) the right to consent to, refuse, or withdraw from any type of health care.  Additionally, worth noting, even though a Power of Attorney For Property generally ends at death, a Power of Attorney For Health Care may extend beyond your death if desired so that your agent can access your medical records, request an autopsy, or address other post-death issues.  Lastly, worth noting, this power may be revoked by you at any time.

Overall, while most of us may not be of likes of a Winston Churchill or Ralph Waldo Emerson, we can at least be wise in how we plan for the future.  The examples, noted above, for how you can protect your property and health care decision making as you get older will assist not only you, but also your family and your loved ones.  For more information, please do not hesitate to contact Hurley Stanners, LLC.


10 Things Every Business Person Should Know

Every year we realize that our business clients, whether in the manufacturing, service, real estate development  or creative arts and entertainment fields, are more knowledgeable about some issues and less about others than we would have imagined.  We have learned that our clients  are very sophisticated about marketing and about the internet. What we were not prepared for were repeated instances that suggested that they did not know  as much as they should about the requirements of operating  their corporations or limited liability companies, and about their  business contracts. We have decided to share what we have learned  so that as the economy improves our clients will be able to avoid unnecessary legal and accounting costs.

With the increase in the use of the Internet generally and the creation of governmental web sites, like the Illinois Secretary of States web site, more information is available today about self incorporation, whether as a corporation or a limited liability company. Many mistakes are made as a result of self incorporation and sometimes the mistakes are quite serious. These generally include issues with regard to Sub-S elections, federal and state tax registrations, business licenses, and state statutory requirements. There are also important conceptual things which clients miss when they do not work with an attorney to incorporate their business. One is that generally the corporation and not the business owner should be the party to enter into the business’s contracts. We had one client incorporate to protect her personal assets and then sign individually and on behalf of the corporation on all contracts.  This totally negates the advantages that corporations and limited liability companies (LLCs) have over sole proprietorships and partnerships.  We worked with a great number of clients who self incorporated and then had to pay to correct costly errors or to be re-instated because they did not understand certain statutory or administrative requirements. We always advise our clients of the types of matters they can handle themselves to save costs. Incorporating is simply not one of those items.

We suggest to all clients who want to set up a new business that they first create a  business plan. A Business  plan helps to identify your business market, customers, operating capitol (cash) requirements and other issues. It is required if you are going to seek bank financing. But even if you are going to provide self or family financing for your business venture, a Business Plan helps to flesh out the facts that you need to operate. It can also serve to clarify which owner will do what and ultimately whether you are better off with joint owners or not. There are numerous tools for creating good Business Plans. Let us know if you need any resources.

Before setting up a new business, using a new trade name for a product or service or creating a domain name and/or web site, you should make sure that you are not infringing the rights of another business in that name. Remember that anytime you use a name in your business which is similar to that of another business selling a similar type of product, you could be causing confusion in the market and exposing your business to a lawsuit based on trade or service mark infringement. Just because you have obtained a domain name from a domain name service does not mean that you will not be infringing on another party by using the name. A domain name must be registered as a trade mark for protection. Whether the conduct on your part is intentional or not is not the issue. To avoid this costly mistake you should have a search conducted by a reputable intellectual property law firm   The intellectual property law firm can then tell you if the name is available and how to register the trade or service mark with the United States Patent and Trademark Office for your business.

The Secretary of State is the governmental office which controls business entities and enforces the various state statutes regarding business entities.  The Secretary of State requires companies and limited liability companies to have a registered agent. This is the contact person with the Secretary of States Office. It is common business practice that this person be your business’s attorney. This is because business people get busy and do not always understand the legal ramifications of the communications they receive from the Secretary of State. Your business attorney does and will see that all time sensitive matters are handled timely.

A Minute Book is a book which contains all of the important papers  relative to a corporation. This would include the Articles of Incorporation, which is the initial form filed to create a corporation as well as Minutes, Stock Certificates and tax registration number applications. Keeping a Minute Book updated is important in the event that an IRS audit occurs, a joint owner wants to sell  his or her interest or you want to buy a business or sell your own business.

Business owners seek a business entity that protects them as well as provides them with certain accounting and tax advantages. Once incorporated, whether as a corporation, limited liability company or otherwise, you must  comply with all of the state statutory and other requirements that exist in order to maintain the protection against personal liability that you desired in the first place. Your business attorney should explain these items to you in detail. Suffice it to say this generally means creation of a business bank account, minimum initial capital requirements and compliance with yearly statutory annual report and meeting requirements.

As a rule if you have created a corporation, limited liability corporation, partnership or other business entity you need  to understand that you are signing not individually on a contract for your business  but as the corporation, limited liability corporation, partnership or other entity. You need  to talk to your attorney on how to effectively sign contracts without personally obligating yourself, as an owner.

We had a number of clients use e-mail in communicating with clients, including communications which sought to create a contract. Unfortunately the too casual form of “e-mail speak” when using e-mail for business can prevent a clear meeting of the minds as to the terms of the contract being created. In some instances, it is not even clear that a contract has been created. One client risked recovery of $50,000 because he had used e-mail for all communications with a client, which client eventually tried to avoid total contract liability. While the term “snail mail” is used today as a popular derogative remark for regular first class mail,  formal business letters sent by mail are generally written much  clearer as to the terms of a contract being created than  e-mail communication used to confirm a business contract.

If you write formal business letters and e-mail them instead of mailing them and they contain a clear and concise statement of the terms of a business relationship then you should end up with each party understanding that a contract has been formed and what the terms of the contract are. However, e-mail by its nature and practice seems to cause even the most careful business person to be too casual. It is not adequate in most business contexts to write, “Ah, sure that’s great. Let’s move forward and sign it Bill.” Have you created a contract?  What are its terms? Who is the party entering into the contract, the business or the owner personally. While e-mail saves time and avoids delays through playing telephone tag, it is also a devise that must be used wisely in order to avoid expensive mistakes.

As a part of your general  business practices, you should make sure that you have a fully executed copy of every business contract. We suggest a separate file for each. These files can then be reviewed for budgetary purposes, notice requirement (i.e. when a renewal or termination notice needs to be given) and other contractual obligations. We had a major client that failed to contemplate its contractual obligations when making major business structural changes and ended up in litigation for breach of contract with a vendor. This was totally unnecessary and should not happen to you.

Because we hear this frequently from our clients, we can not over emphasize that any contract can be negotiated. The fact that a contract looks like a typed form is irrelevant. Short term contracts often reflect the power of the stronger party to the contract but long terms contracts should be created and viewed by each party as mutually beneficial.  Otherwise, problems should be expected.