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An Ounce of Prevention

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ph-programsThe following is a reprint of an article I wrote for the March 2016 edition of the Oakland Metropolitan Chamber of Commerce’s monthly magazine.

Everyone understands the value of lawyers if you are sued or need to sue someone who has damaged your business. Yet far fewer owners appreciate the value of consulting experienced business attorney before problems arise.

Just as in construction, when building a business one’s success depends on the time and energy spent establishing a solid foundation. Moreover, having an awareness of the consequences of the decisions one makes regarding one’s business is critical to the preservation and enduring stability of that business.

Having spent decades as a trial lawyer, I have the experience and insight to predict the kinds of mistakes most business owners are likely to make. I also know with relative certainty what the impact will be on a company when a particular mistake is made. This is not to say I’m clairvoyant; I’ve simply witnessed patterns in the hundreds of lawsuits I’ve analyzed and litigated.

I also know that the cost of cleaning up these types of mistakes is exponentially higher hiring a good transactional lawyer in the first place. Given the opportunity, such an attorney can craft the appropriate types of business structure, agreements, policies and procedures to reduce the possibility of catastrophic risks occurring. And such planning will also mitigate and reduce the effects of these occurrences. Stated otherwise, proactive planning is always cheaper and more effective than reactive crisis management.

Unfortunately, an increasing number of business owners choose to “save money” by using legal documents they find on the internet without ever consulting an attorney. Far too often, this type of “citizen lawyering” results in contracts and other documents that are completely unsuited to the particular business, and that lack basic legal protections. I’ve seen California businesses using contracts intended for use in Australia, setting up the wrong type of business entity, and as a host of other horror stories.

The lesson to be learned is that the more thought and time you spend identifying, understanding and planning for the risks your business may face, the more likely the company will survive and thrive. Consulting an experienced business attorney is key to this process.

When assessing any business client, among the questions I always ask are:

(1) What are the potential risks this business may encounter in the industry it inhabits?

(2) What type of entity or structure is best suited for the business, and that will provide the optimal legal protection and financial benefit?

(3) What are the legal requirements and procedures the owners must follow to retain the financial benefits and legal protections the business entity and structure can provide?

(4) Do the contracts and agreements the business uses provide appropriate protection against the types and frequencies of risks the business will face?

(5) Is there a written plan to protect the company and its owners in the event of a catastrophic event?

With these answers, an experienced business lawyer can help the owner proactively plan so as to support the business’ stability, growth and longevity.  Contact our office if you think your business might benefit from such a conversation.

What Machu Picchu Teaches About Business Success

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Just as in construction, when building a business, one’s success depends on the time and energy spent establishing a solid foundation.

Those who know me are familiar with my love of international travel.  In particular, I am fascinated in understanding why certain structures have survived the tests of time whereas others are but a pile of rocks and rubble.

Recently a friend and I visited Machu Picchu, most famous of the Incan temples.  We were both amazed by how well preserved the buildings are, despite the fact the ancient city sits on a mountain top that has nearly 100 inches of annual rainfall in one of the most seismically active regions on earth.

Without question, Machu Picchu is an “engineering marvel.” The ancient builders invested as much effort into creating a stable infrastructure for Machu Picchu—underpinned by layers of topsoil, sandy gravel, and granite waste rock—as on the visible buildings. More than 700 terraces retained and channeled moisture and preserved soil, reducing erosion while providing space for agriculture.

I use this particularly vivid analogy to illustrate an important lesson: the more thought, time and planning one spends in constructing the foundation for a business, the more successful that business will be in weathering the storms and quakes of an uncertain and often volatile economic climate.

Over the 30+ years I have counseled business owners, the more passionate I have become in advocating these concepts.  Without exception, the businesses I have seen fail are those whose owners were so eager to “get out of the blocks” that they overlooked the key building blocks necessary to ensure their long-term viability and success.

When starting a business, it is essential to ask:

(1) Have we identified and evaluated all the potential risks involved in our particular type of business?

(2) Have we determined what type of business entity is best suited for our particular enterprise, and which will provide us the most legal protection and financial benefit?

(3)  Do we understand clearly the legal requirements and procedures we must follow in order to retain the financial benefits and legal protections the business entity can provide?

(4) Do we have a plan to protect the company and its owners in the event of a catastrophic event?

Certainly, there are a many other issues that must be considered.  If you’d like a list other questions you should be asking, email me at brian@brianaripley.com.