Association: CCIM
How do you sign a lease?
In most situations, if a company files for Chapter 7 bankruptcy; the individual’s employment contract with the company may not be considered to be valid. When a company files for a Chapter 7 bankruptcy, all its contracts and proceedings may get cancelled. The company may get liquidated by the bankruptcy court. If there are any funds in the. The vendor sells some or all of its assets to the purchaser resulting in a transfer of such assets, including those desired contracts to which the company is a party to. Such transfer of the.
The question seems ridiculously simple. You just sign your name on the dotted line, correct? No!
The difference between personal financial ruin and just another day at the office can be:
By: _________________________________
John Smith
and
ZZZ RENTAL INC.
By: _________________________________
John Smith
Its: President
Is this really such a big deal? Sounds like a bunch of lawyer nonsense right? Wrong!
It is a pain, and it may seem silly, but if you do not want to be held personally liable for the lease (or any other contracts you sign), then you must sign it properly. It is important to correctly sign a lease so your company (i.e. a “legal entity”) is liable and not you personally.
What is a legal entity?
A legal entity is a corporation, S-corporation, limited liability company or other similar organization, recognized under the laws of your state. As far as the law is concerned, a legal entity is a separate and independent legal individual that can sign contracts, assume liabilities and engage in most actions of a living person. The reason legal entities are created is because they allow people (that is, real people like you and me) to avoid liability.
Owners and managers of companies must put the rest of the world on notice that the entity exists. This is done by (1) properly filing and creating the entity under state law; (2) identifying the entity’s name along with its corporate status (e.g. ZZZ Rental Inc. or ZZZ Rental LLC); (3) properly signing contracts (including leases) to demonstrate that you are signing on behalf of the entity and not yourself; and (4) maintaining proper corporate separation and recordkeeping.
A legal entity limits personal liability. That is, if someone receives a huge judgment against an entity you control, only the entity will be required to pay the judgment. In a worst-case scenario, the entity could cease doing business or file bankruptcy. As a shareholder or member of a legal entity, you will not be required to pay the judgment or file personal bankruptcy. Obviously, this assumes you have done everything to maintain the proper legal status of the entity and you have not provided any personal guaranties, which could result in liability.
The fact that you may own all of the shares in ZZZ Rental Inc. does not mean it is you. You need to put the world on notice that you consider the entity separate from you. One of the most important ways you can do this is by properly signing contracts.
What happens if you sign wrong?
Lease: Company/Personal
There are many examples where an individual had improperly signed an agreement and was held personally liable. The courts have found that parties signing a lease “personally,” even though they thought it was a company lease, were personally liable.
The first paragraph of the lease said it was between the landlord and the tenant: “This Lease is by and between XYZ Corp. (“Tenant”) and Big Owner (“Landlord”) (I have changed the names and the entities to protect confidentiality). However, the tenant signed the lease as follows:
By: ________________________________
Tom Jones, Owner
The landlord sued both Tom Jones individually and his company (XYZ Corp.) because Jones refused to pay the landlord. Jones was personally liable because he personally signed the lease. The court concluded that the lease was enforceable and the landlord was entitled to a judgment against both XYZ Corp. and Jones.
This joint judgment allowed the landlord to collect over a hundred thousand dollars from Jones personally. Because this was not an insurable claim, Jones faced personal financial ruin if he did not promptly pay the judgment. The landlord was able to obtain this judgment relying in large part on Jones’ signature with no mention of XYZ Corp.
Signing correctly
Assume you are given a lease that provides the following signature block at the end of the contract:
TENANT: LANDLORD:
WORLDWISE ENTERPRISES, INC.
By: __________________________ By: Jane Bigshot________________
Its: Vice President
What do you do?
Based on the information above, it should be clear that a tenant does not simply sign. Instead, the tenant should modify the signature blocks by hand (which is allowed even if the lease is typed) or have the lease retyped to include the full name of the tenant’s company and the signer’s title at the company. For example:
TENANT: LANDLORD:
ZZZ RENTAL LLC WORLDWISE ENTERPRISES, INC.
Happy Party Train Mijuku Dreamer KOI NI NARI TAI AQUARIUM Aozora Jumping Heart Daydream Warrior MIRAI TICKET Sunshine Pikkapika Ondo SKY JOURNEY MATETE TE AI NO UTA Omoi yo Hitotsu ni Nare Humming Friend Yume De Yozora Wo Terashitai Yume Kataru yori Yume Utaou Shojo Ijo no Koi ga Shitai Jingle Bells ga Tomaranai Daisuki Dattara Daijoubu! Happy party train mp3 320kbps. Keywords: Aqours Top Song Aqours Music Aqours MP3 Aqours Lyric Aqours Happy Party Train Lyric: Taiyou o Oikakero! TODOKA NAI HOSHI DA TO SHI TE MO Kimi no Kokoro wa Kagayaiteru kai? The group consists of nine members.
By: John Smith_____________ By: Jane Bigshot_____________
Its: President Its: Vice President
With this important change made, the lease can be signed. Everyone is now on notice that an entity and not an individual is signing the contract.
Diligence is required
When I recently reminded one of my clients that she needed to put “LLC” at the end of the name of her business when she signs contracts, she responded she sees “Microsoft” all the time without the word “Inc.,” “Corp.” or “Company.” If Microsoft doesn’t always indicate that it is a corporation, why should her little company be required to do so? My response is simple: Her small LLC is not Microsoft.
If you are operating a business entity, you must be diligent in letting the world know that you are operating the business as a separate legal entity. People running small companies need to be far more diligent in identifying themselves as legal entities.
If you have a few employees, it is possible to be found to be acting personally (as opposed to through a legal entity). Therefore, it is especially important that owners of small companies properly sign their contracts, especially leases.
It is a little thing that can make all the difference – sign carefully.
Steve Yoch, a partner at the law firm of Felhaber, Larson, Fenlon & Vogt, P.A. in St. Paul, practices in the areas of real estate and general business, and serves on the board of the Minnesota-Dakotas Certified Commercial Investment Member chapter. Yoch can be reached at [email protected].
In this article, I summarize 10 key contracts for small and growing businesses. These contracts need to be well thought out and well drafted and can be crucial to the success of a business.Employment Offer Letters
One of the best ways to protect your business from legal liability and misunderstanding with an employee is to have an employment offer letter issued and sent to the prospective employee. The employee should then be required to sign it, evidencing the scope of the employment relationship between the parties.
A good employment offer letter covers the following points:
- The particular job offer
- The responsibilities of the job
- The salary and the benefits
- That the employment is “at will," meaning the employee can quit or the employer can terminate him or her at any time
- That the employee is required to sign a Confidentiality and Invention Assignment Agreement (discussed below)
- That the letter constitutes the entire agreement of the parties, and can only be amended in the future in writing, signed by the employer and the employee
- That any disputes will be handled exclusively by confidential binding arbitration (other than certain designated types of disputes, such as those related to worker’s compensation)
Confidentiality and Invention Assignment Agreements
Employees have access to a company’s confidential information. Moreover, many businesses expect their employees to come up with ideas, products, business strategies, and inventions.
To make sure the employees keep the proprietary information of the company confidential, you should require them to sign a Confidentiality and Invention Assignment Agreement. This agreement deals with the confidentiality issue, but it can also provide that the ideas, business strategies, and other work product developed by the employee belong to the company, and not to the employee.
If you expect to have venture capitalists or other professional investors invest in your company, they will expect that you have these agreements in place for all of your employees. Vb persediaan barang.
Service Contracts
If your company provides professional services as opposed to selling a product, it needs to have its own good, standard form Services Contract (which can be labeled many things, including an Agreement for Professional Services). This type of agreement lays out the terms and conditions under which you provide services and specifically spells out your responsibilities and liabilities.
Having a good contract here is important. You want to avoid misunderstandings and undue liability. Ideally, this agreement gives you flexibility in completing the services, lists the fees for the job (and additional fees if you encounter unforeseen circumstances), and sets limitations on your liability (such as limiting that liability to the amount of the services fee).
strong>Sales Contracts
Many businesses sell products, and therefore need a good Sales Contract. The Sales Contract lays out the price, terms, and conditions for the sale of goods, equipment, or other products. Of course, some businesses (like the corner grocery store) don’t need Sales Contracts, but if your products sell for significant dollars, then you likely need a Sales Contract.
The actual Sales Contract can take the form of fine print on an order form or an invoice, or it can be tailor-made for a particular sale. You always want to start with your own form of contract. The key terms in Sales Contracts include price, price adjustments in certain events, responsibility for taxes, payment and credit terms, warranties to be given, disclaimers of various warranties, and liability limitations.
Confidentiality Agreements
Numerous instances arise in which you want to share confidential or proprietary information with another party. You may want to show the information to get them interested in doing a deal with you, investing in your company, or working together on some strategic arrangement. Producing an agreement to prevent the other side from stealing or using your ideas is very important in these situations.
The Confidentiality Agreement (also referred to as a "Non-Disclosure Agreement" or "NDA") provides that the recipient of proprietary information holds the information in strict confidence and will only use the information for the purposes of evaluating whether or not to enter into a business relationship with you. The key to this agreement is that you should enter into the agreement before any disclosure.
A good Confidentiality Agreement lays out the recipient’s confidentiality obligations, the exclusions from the confidentiality (such as information already in the public domain), how long the confidentiality obligation lasts, limitations on the use of the information, and the right of the disclosing party to seek injunctive relief to stop the other side from disclosing the information.
Web Site Terms of Use Agreement
Most growing businesses have established (or should establish) a Web site to market their company and their products. Essential to these Web sites is a Terms of Use Agreement, which is intended to be a contract between the Web site owner and the users of the site and any purchasers of goods or services from the site.
A good Terms of Use Agreement is essential for avoiding legal liability to the site owner. The well-drafted agreement includes: limitations on how the site can be used, copyright protection warnings, disclaimers, liability limitations, disclosure on the site’s privacy policy in dealing with customer information, jurisdiction where any disputes must be brought (ideally, the home town of the site owner), and much more.
Letters of Intent
A letter of intent can be a very advantageous and quick way to get momentum for a deal. The idea for a Letter of Intent is for the parties to get a “handshake” deal on the major points, and then move to creating definitive legal agreements.
You need to be very careful about what you want to be binding or nonbinding in the letter. Most Letters of Intent are nonbinding and are merely expressions that the parties have a particular deal in mind and want to further negotiate to a definitive complete agreement. Letters of Intent can also be binding contracts, however, so be careful what you say in these letters.
Stock Purchase Agreements
Start-up and emerging businesses often need to raise capital to fund their business. They often do this by selling stock in the company.
Stock Purchase Agreements are the vehicle where stock sales can be effected. Such agreements can run from a few pages to 50 or more, depending on the investors and the complexity of the deal.
In most agreements, you need to carefully lay out the following: the type of the stock sold, the price and number of shares, the representations and warranties of the investors, the representations and warranties of the company, the conditions to closing, the rights of the investors, and potentially much more. This is an agreement on which you typically need advice from an experienced corporate counsel.
Leases
A business lease for office or retail space is often one of the most significant contracts for a business. The starting place for most lease negotiations is the landlords allegedly “standard” lease, which tends to be incredibly one-sided in favor of the landlord.
Because the lease can constitute a major commitment for the business, you have to watch out for all the “gotchas.” Most important, you have to ensure that:
- The space fits your needs.
- The uses the landlord permits for the space are broad enough for your business.
- The lease term is sufficient, with a right to extend if possible.
- The economic terms are competitive.
- The lease clearly spells out the landlord's obligations.
- You have some flexibility in assigning or subletting the lease.
- There is a limitation on pass-through operating expense and tax increases.
Loan Agreements
Many businesses enter Loan Agreements with banks or financial institutions and simply sign the lender’s “standard” form. The standard form tends to be very one-sided in favor of the lender, with various restrictions on the borrower.
The borrower under a Loan Agreement needs to fully understand (and negotiate better terms than those contained in the standard form) a number of key issues, including the following:
- The total cost of the loan
- The payment schedule
- The right to prepay the loan without penalty
- The flexibility on use of the loan proceeds
- The right to cure defaults
- The appropriate representations and warranties of the borrower
- The covenants that can trigger a default
To download samples of these important business contracts and other forms, contracts, and checklists, visit the Forms and Agreements section of AllBusiness.com.
Copyright © by Richard Harroch. All Rights Reserved.
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For local business information on 15 million businesses, visit InBusiness.com.
'>In this article, I summarize 10 key contracts for small and growing businesses. These contracts need to be well thought out and well drafted and can be crucial to the success of a business.
Employment Offer Letters
One of the best ways to protect your business from legal liability and misunderstanding with an employee is to have an employment offer letter issued and sent to the prospective employee. The employee should then be required to sign it, evidencing the scope of the employment relationship between the parties.
A good employment offer letter covers the following points:
- The particular job offer
- The responsibilities of the job
- The salary and the benefits
- That the employment is “at will,' meaning the employee can quit or the employer can terminate him or her at any time
- That the employee is required to sign a Confidentiality and Invention Assignment Agreement (discussed below)
- That the letter constitutes the entire agreement of the parties, and can only be amended in the future in writing, signed by the employer and the employee
- That any disputes will be handled exclusively by confidential binding arbitration (other than certain designated types of disputes, such as those related to worker’s compensation)
Confidentiality and Invention Assignment Agreements
Employees have access to a company’s confidential information. Moreover, many businesses expect their employees to come up with ideas, products, business strategies, and inventions.
To make sure the employees keep the proprietary information of the company confidential, you should require them to sign a Confidentiality and Invention Assignment Agreement. This agreement deals with the confidentiality issue, but it can also provide that the ideas, business strategies, and other work product developed by the employee belong to the company, and not to the employee.
If you expect to have venture capitalists or other professional investors invest in your company, they will expect that you have these agreements in place for all of your employees.
Service Contracts
If your company provides professional services as opposed to selling a product, it needs to have its own good, standard form Services Contract (which can be labeled many things, including an Agreement for Professional Services). This type of agreement lays out the terms and conditions under which you provide services and specifically spells out your responsibilities and liabilities.
Having a good contract here is important. You want to avoid misunderstandings and undue liability. Ideally, this agreement gives you flexibility in completing the services, lists the fees for the job (and additional fees if you encounter unforeseen circumstances), and sets limitations on your liability (such as limiting that liability to the amount of the services fee).
strong>Sales Contracts
Many businesses sell products, and therefore need a good Sales Contract. The Sales Contract lays out the price, terms, and conditions for the sale of goods, equipment, or other products. Of course, some businesses (like the corner grocery store) don’t need Sales Contracts, but if your products sell for significant dollars, then you likely need a Sales Contract.
The actual Sales Contract can take the form of fine print on an order form or an invoice, or it can be tailor-made for a particular sale. You always want to start with your own form of contract. The key terms in Sales Contracts include price, price adjustments in certain events, responsibility for taxes, payment and credit terms, warranties to be given, disclaimers of various warranties, and liability limitations.
Confidentiality Agreements
Numerous instances arise in which you want to share confidential or proprietary information with another party. You may want to show the information to get them interested in doing a deal with you, investing in your company, or working together on some strategic arrangement. Producing an agreement to prevent the other side from stealing or using your ideas is very important in these situations.
The Confidentiality Agreement (also referred to as a 'Non-Disclosure Agreement' or 'NDA') provides that the recipient of proprietary information holds the information in strict confidence and will only use the information for the purposes of evaluating whether or not to enter into a business relationship with you. The key to this agreement is that you should enter into the agreement before any disclosure.
A good Confidentiality Agreement lays out the recipient’s confidentiality obligations, the exclusions from the confidentiality (such as information already in the public domain), how long the confidentiality obligation lasts, limitations on the use of the information, and the right of the disclosing party to seek injunctive relief to stop the other side from disclosing the information.
Web Site Terms of Use Agreement
Most growing businesses have established (or should establish) a Web site to market their company and their products. Essential to these Web sites is a Terms of Use Agreement, which is intended to be a contract between the Web site owner and the users of the site and any purchasers of goods or services from the site.
A good Terms of Use Agreement is essential for avoiding legal liability to the site owner. The well-drafted agreement includes: limitations on how the site can be used, copyright protection warnings, disclaimers, liability limitations, disclosure on the site’s privacy policy in dealing with customer information, jurisdiction where any disputes must be brought (ideally, the home town of the site owner), and much more.
Letters of Intent
A letter of intent can be a very advantageous and quick way to get momentum for a deal. The idea for a Letter of Intent is for the parties to get a “handshake” deal on the major points, and then move to creating definitive legal agreements.
You need to be very careful about what you want to be binding or nonbinding in the letter. Most Letters of Intent are nonbinding and are merely expressions that the parties have a particular deal in mind and want to further negotiate to a definitive complete agreement. Letters of Intent can also be binding contracts, however, so be careful what you say in these letters.
Stock Purchase Agreements
Start-up and emerging businesses often need to raise capital to fund their business. They often do this by selling stock in the company.
Stock Purchase Agreements are the vehicle where stock sales can be effected. Such agreements can run from a few pages to 50 or more, depending on the investors and the complexity of the deal.
In most agreements, you need to carefully lay out the following: the type of the stock sold, the price and number of shares, the representations and warranties of the investors, the representations and warranties of the company, the conditions to closing, the rights of the investors, and potentially much more. This is an agreement on which you typically need advice from an experienced corporate counsel.
Leases
A business lease for office or retail space is often one of the most significant contracts for a business. The starting place for most lease negotiations is the landlords allegedly “standard” lease, which tends to be incredibly one-sided in favor of the landlord.
Because the lease can constitute a major commitment for the business, you have to watch out for all the “gotchas.” Most important, you have to ensure that:
- The space fits your needs.
- The uses the landlord permits for the space are broad enough for your business.
- The lease term is sufficient, with a right to extend if possible.
- The economic terms are competitive.
- The lease clearly spells out the landlord's obligations.
- You have some flexibility in assigning or subletting the lease.
- There is a limitation on pass-through operating expense and tax increases.
Loan Agreements
Many businesses enter Loan Agreements with banks or financial institutions and simply sign the lender’s “standard” form. The standard form tends to be very one-sided in favor of the lender, with various restrictions on the borrower.
The borrower under a Loan Agreement needs to fully understand (and negotiate better terms than those contained in the standard form) a number of key issues, including the following:
- The total cost of the loan
- The payment schedule
- The right to prepay the loan without penalty
- The flexibility on use of the loan proceeds
- The right to cure defaults
- The appropriate representations and warranties of the borrower
- The covenants that can trigger a default
To download samples of these important business contracts and other forms, contracts, and checklists, visit the Forms and Agreements section of AllBusiness.com.
Copyright © by Richard Harroch. All Rights Reserved.
Related Articles on AllBusiness:
For local business information on 15 million businesses, visit InBusiness.com.