Lots of factors go into making your small business the best it can be. But a look at what will make your business work the best includes a look at not only how you configure your business, but also the best public policy and environment in which small businesses thrive. We thought we’d take a look at some of the factors not only in the U.S. but around the world. What do you think make for best practices in small business. Please enter your suggestions below!
Legal
Do-it-yourself legal work will save your business money. This list of cost cutting suggestions for small business startup includes legal resources that can help you shave legal fees off your launching costs. The Web contains some excellent resources for legal basics. Not all are a substitute for hiring an attorney, but some can save you cash on the simple things. Daily Dose
Don’t forget legal and other details when creating your business. Getting excited with a great idea for a new small business is euphoric. But don’t forget there’s plenty of hard work involved including logistics. Here is a list of just some of the considerations, including some legal issues, you should be considering as you start your new small business. Sentinel Source
The art of hiring an attorney. Hiring an attorney, or attorneys, for your small business isn’t what it used to be, and that can be great news for small businesses struggling to cut costs. A new tighter economy has reduced legal costs and made it possible to negotiate on fees and parcel out the work for increased productivity at lower cost. Here are some very basic starting points. NYTimes.com
Trends
Are you willing to put your brand on the line? A new Maryland designation allows some socially conscious small businesses to do just that. The state’s new “benefit” corporation status lets businesses put their commitment to fair trade, eco-friendly or other specialized goods and products into their charter. So far the states has had 15 companies take them up on the new designation. Would you? The Washington Post
Transparency is the new standard. This law firm is blazing the way in a way that we see across the spectrum in terms of the behavior expected of small businesses and, indeed, all businesses today. Explain the basis of your billing, don’t keep secrets from your clients or try to keep them in the dark. It’s important for businesses to learn how to take a new approach to dealing with customers and each other. Irish Times
Policy
Healthcare battle begins in the U.S. Senate. Opponents of a healthare package seen as unfriendly to small business vow to push for repeal of the legislature in the U.S. Senate following a successful effort in the U.S. House. Attempts to repeal the law in the Senate will be more difficult due to support from the majority support there. A recent survey indicated most small business owners oppose the law which might force many businesses to either offer health benefits or pay a penalty. The Washington Post
Feds change course on anti-business regs. Two regulations pushed by U.S. federal agencies but opposed by business group seem no longer to be on course for implementation perhaps thanks to a change in administration policy. The regs proposed would have required elimination of noise in manufacturing environments and required more testing for medical devices. Your thoughts? WSJ
Global
Tax favoring small business may break EU law. You might think regulations benefiting small business would be viewed as a good thing by everyone. But it turns out a so-called “supertax” on big retailers in Scotland may break EU law. And a large retailer effected by the tax may take it to court. Of course, as much as we support small business here at Small Business Trends we’re not quite sure penalizing another class of business is the way to do it. See the full article. Press Association
Finance
Why more funding isn’t always the answer. Debate continues over the importance of funding to small business growth. But a recent story shows how funding isn’t necessarily the answer to businesses large or small. In this article we see a company that still went bankrupt laying off hundreds and leaving millions in debt, including to other small businesses, after receiving $8 million in funding backed in part by state tax credits. Chicago Tribune
Taxes
Important small business tax changes. There have been some important small business tax changes for 2011 and while not all will make a big difference to your overall tax preparation, it’s important to understand those that do allowing you to make better choices about running you company. In particular, be aware of changes related to the Small Business Jobs Act of 2010. Details in the link above. Herald-Tribune
(Editor’s note: Curtis Smolar is a partner at Ropers Majeski Kohn & Bentley. He submitted this column to VentureBeat.)
A reader asks: My business is in an industry where sales people and software engineers are often recruited by competitors. How can I protect my company from being raided?
Answer: Employers use what are called restrictive covenants to protect trade secrets and prevent employees from unfairly stealing clients and/or information. Courts heavily scrutinize these covenants so it is imperative to have a seasoned attorney assist you with writing one that will be enforceable under the laws of the state where your company is located. (Just missing a few words can create tremendous grief for an employer.)
There are a variety of these available, but let’s look at the most common:
Non-disclosure agreeements: Non-disclosure agreements (“NDAs”) are one of the most effective and commonly used solutions to this problem. An NDA protects information that is a trade secret – data that has economic value (actual or potential) due to its exclusivity and is something you’re making efforts to keep secret.
Taking trade secrets without the owner’s consent is called misappropriation and if an employee misappropriates a trade secret, a company has the right to recover:
- Actual damages it suffers from the theft
- Repayment of the money made by the employee (or his new employer) as a result of the trade secret theft
- Injunctions requiring the return of the stolen property
- Attorney’s fees
To ensure the full protection of an NDA, you’ll need to require the employee to sign a confidentiality agreement when they come on board that defines the scope of information your company is trying to protect. This can be anything from a company’s secret sauce to pricing, lists and business processes.
Additionally, the NDA should contain a proprietary inventions assignment agreement (PIAA), which ensures that all work products created by the employee belong to the company and not to the employee – and the employee has no right to take them when he or she leaves the company. This can include everything from software programs to customer lists to website designs to pricing.
Covenants not to compete – Better known as non-compete agreements, the enforceability of these varies dramatically from state to state. In the states in which they are enforceable, like New York or Massachusetts, they can be very powerful tools. In other states, like California, they are generally prohibited.
California specifically has a statute stating that restrictive covenants not to compete are presumed invalid unless specific circumstances apply. For example, if the owner of a company sells their business, a non-compete may be enforceable against him or her in California.
For the states where these are enforceable, there are still some restrictions based on the duration of the agreement, geographical location and the breadth of activity prohibited.
Additionally, in many cases it doesn’t matter where the agreement was entered into or what the laws are there. If the employee moves to another state, either during or after employment, things can become muddled. So, it’s best to use non-competes with great caution. They may not be as effective as you initially think.
Non-solicitation – There are basically two kinds of non-solicitation agreements – non solicitation of employees and non-solicitation of clients.
Non-solicitation of employees is generally enforceable in most states, but a non-solicitation of clients may be considered an unfair restraint on trade. The exception in those situations is if the non-solicitation agreement is necessary to protect trade secrets.
Non-solicitation agreements are generally less onerous then covenants not to compete and typically more enforceable.
Startup owners: Got a legal question about your business? Submit it in the comments below or email Curtis directly. It could end up in an upcoming “Ask the Attorney” column.
Disclaimer: This “Ask the Attorney” post discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. VentureBeat, the author and the author’s firm expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.
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