The Schoenbaum Firm, PLLC

Focused Strategy and Thoughtful Counseling

The Schoenbaum Firm, PLLC provides legal services for businesses and professionals including business formation, contracts, strategy and dispute resolution. The firm also offers flat rate estate planning.  The firm values the importance of efficiency and quality that is critical for every entrepreneur and seeks to develop lasting relationships with clients to ensure their continued success.

Part 1: Online Legal Services v. Attorneys

Texas Single Member LLC Formation

Disclaimer: This blog series is based on my personal experience with Legal Zoom in late 2015. I did not actually pay Legal Zoom, and so I did not receive final documents to review. As such, this is not a discussion of the content of the documents. My observations are based on the forms and information they request to build those documents. This blog should not be considered legal advice.

I have been curious for a long time to see what the actual cost is for Legal Zoom to draft some of the most common legal documents I use in my practice. I used Legal Zoom because it is the resource most frequently cited by clients and prospective clients.

Here is the not too surprising result of my experience with online legal documents: these companies are going to try to up-sell you on nearly every single aspect of starting your business. Legal Zoom makes it very clear from the beginning they are not offering legal advice. You can pay them extra to receive actual advice from lawyers (who are predominantly very recent graduates from a single firm), but this is not included in the base rate of their products.  You also pay significantly more to match the turnaround time of a good attorney. The base rate has a turn around time of 30 days. To match the attorney time frame you must pay them $210 more.

Legal Zoom                    Estimated Attorney Cost*

Texas State Filing Fee                $300                               $300

Registered Agent Fee                $89                                  $0

Company Documents (7-10 days) $359                           $500

Company Minutes                      $280                               $200

Access to Attorney for questions $29/hr (2 hrs)                Included

Tax ID Number Set Up                $80                                $0 (free to set up online)

TOTALS                                      $1137                             $1000

Legal Zoom wants to be your registered agent at a fee of $159.00 per year. That is not too far off the market rate for registered agent services, but if you live in Texas, and privacy is not a large concern, you can be your own agent. Legal Zoom does not promote this option, and it shows, as a large percentage of its customers chose Legal Zoom as their agent. Tax ID set up is also very straightforward once your attorney points you in the right direction, and can be completed in around ten minutes.

The key difference in my opinion between Legal Zoom and a knowledgeable attorney is that your attorney is going to explain how and why the process works, and also teach you about the process as it applies to your specific business you so you feel confident that you have made the right choices for your new company.

* Costs may vary based on the complexity of the entity and other factors. For a quote or more information about entity formation and other business matters, contact Lauren at Lauren@SchoenbaumFirm.com.

The Risks of Internet-Based Legal Services

Many businesses, especially new businesses, are tempted by the prices offered by online legal services. While they may save you some money on the front end, these form agreements and templates can expose you to both headaches and large legal bills down the road. Here are the top four issues I encounter with online legal forms.

1.     Language that Simply Isn’t There

In every online template-originated document I have ever reviewed for a client, I have found a major provision that simply was not there. The reasons for this are incredibly diverse. Some are absent because they are Texas specific provisions that are not in the national forms a company uses, some may be absent because the client did not know a provision was key to the proper function of the agreement, and some are missing because the laws have changed and the forms used by a company have not yet been updated.

2.     Provisions that are WAY too Complicated

When drafting legal contracts, the easiest way to do it is to add in every provision under the sun. The oft-cited quotation, “I have made this longer than usual because I have not had time to make it shorter” is indicative of the documents that reach 15 or 20 pages when your business probably only needs a 6-10 page contract (maybe even less). The most skilled lawyers have a keen understanding of what you do and do not need in a contract to balance your risk and  properly explain the terms of the agreement, without adding unnecessary complication to your business’s operations.

3.     Less Flexibility

Depending on the complexity and uniqueness of your business, flexibility may also be a concern. If you work as a landscape architect, you need specific provisions in a service agreement that are distinctly different from a website designer’s service agreement. An online form may not allow you to develop the best language for your specific industry and business as it will only let you select one of several options and then force your business to fit into that form.

4.     Human Errors

Without a significant amount of time and experience on the part of the client, it can be very difficult to know exactly which questions to ask yourself or understand the best option for your business for a particular agreement. The other problem is that for many form contracts, there is no person reviewing your information. Lack of oversight can lead to errors in the contract that range from basic mistakes to issues that void the entire agreement. Lawyers are trained to be ridiculously detail oriented: we know what to look for and where the most common errors are found.

If you have an online contract that you would like to revise and update so that it better fits your business or are in need of business contracts of any kind, the Schoenbaum Firm, PLLC offers competitive rates to get your company back on the right track.

No Kids? Not Married? Why You Still Need A Will

Whether you are married or a single, own your home or rent, there are multiple reasons why all adults need an estate plan.

 1.     Your spouse may not inherit everything. Many people assume that their spouse would inherit all of the assets of the estate under the law, but your spouse is entitled only to your half of the community property and part of your separate property. If there is separate property, it will be split between your spouse, and parents or siblings. Often people do not feel their parents would benefit from this inheritance and would rather support their spouse or another family member. Overriding the laws of distribution of property is only possible with a will.

2.     If you are not married, your partner may not inherit at all. Unless you have taken steps to enter into a common law marriage, your partner will likely have no claim to your estate. Your partner could also very likely be excluded from making medical and financial decisions under the laws in Texas. For unmarried people, powers of attorney will be granted to your parents if they are living, or to your siblings.

3.     Supporting documents still matter. Medical Power of Attorney, Physicians Directive, Power of Attorney—all of these documents are equally important to allow YOU to choose who will make decisions if there comes a time when you are unable to make major life decisions on your own.

4.     Avoid passing the expense on to your family. If you die intestate in Texas, the cost to probate your will with a probate attorney can be significantly higher than if you had worked with an attorney to draft a simple will and comprehensive estate plan.  

Resources for Female Entrepreneurs and Business Owners in Austin

Three of my incredibly accomplished friends have started new businesses this month. I am so excited about the atmosphere that is brewing around Austin. People are taking big leaps of faith to pursue their passion and it is an amazing thing to see. As a fellow female entrepreneur, I have found the following organizations a wealth of knowledge, support, and opportunity.  Feel free to include other resources in the comments if there are groups you would like to share.

1.     Women@Austin

Women@Austin is the newest resource on the list. Their goal is to create a mission-driven community dedicated to accelerating high-growth female entrepreneurship through 1) mentoring, 2) access to role models and 3) the process and networks crucial for funding.  The group meets once a quarter at the Capital Factory but they are also adding curated peer groups and mentoring events as they grow.  I attended a marketing roundtable recently that was fantastic.  Their steering committee also boasts an incredible diversity and depth of experience.  I am really excited to see what this group will offer as it grows.  @WomenatAustin

2.     AVINDĒ

AVINDĒ is a community-driven startup accelerator catering to women who want to launch and lead scalable businesses while addressing women’s leadership concerns.  AVINDĒ holds community education events and provides a cooperative environment between new and successful entrepreneurs and their networks.   The group also has two Startup Acceleration sessions per year with up to 30 current and future entrepreneurs to launch companies with guidance from seasoned entrepreneurs, business leaders and investors. AVINDĒ also has occasional lunches through their meet-up page, although they do not have any currently scheduled. AVINDĒ’s meetings draw a more formal business crowd than the Austin Women’s Network. @Avindeaccel

3.     Austin Women’s Network

Austin Women's Network holds a monthly networking event, usually at the Triangle.  The group is organized and run by a mom of five who is also a published author. With over 1,000 members, this Meet-up based group is the most diverse community on this list. Its members bring together a refreshing mix of careers from accountants to yoga instructors to executives and artists. Each meeting includes networking and a presentation by a local speaker.

Additional Resources for New and Growing Businesses

1.     PeopleFund

PeopleFund provides small business loans as well as business assistance and education to people with otherwise limited access to such resources.  PeopleFund is a Community Development Financial Institution (CDFI) and operates as a non-profit 501(c)(3) serving all of Texas. The programs at PeopleFund are two fold: (1) Small Business and Nonprofit Lending and (2) Business Assistance and Education. They offer quality workshops on a wide range of subjects for small businesses and also have a mentorship program. PeopleFund also has great pro bono opportunities for any lawyers who happen to be reading this post. @PeopleFund

2.     Greenlights

For non-profit businesses, Greenlights is the go to resource for the non-profit community in Austin. Greenlight’s mission is to strengthen local non-profits for extraordinary performance and impact. Greenlights also provides fantastic support and strategy tools including management consulting, professional development workshops and conferences, research and a membership program.

Greenlights is also a fantastic resource if you are on a board of a non-profit or interested in joining a non-profit board. @GreenlightsATX

3.     Capital Factory

Capital Factory is a start-up accelerator, incubator and coworking space. Although they have a reputation for tech-focused start-ups, there are a wide variety of businesses taking advantage of the Capital Factory at any given time. Capital Factory hosts a myriad of events, but for women specifically, they host a monthly Women Who Code event for all skill levels. @CapitalFactory

4.     Tech Ranch

Tech Ranch is focused on tech start-ups. Their core purpose is to accelerate the success of technology entrepreneurs and cultivate a collaborative, connected community. They offer programs and classes to increase their knowledge and encourage continuous transfer of information and insight amongst the group. Their best known program is the Campfire which is a networking event held every 2nd and 4th Friday at 3:30. It is free for entrepreneurs and $25 for service providers.  @TechRanch

5.     City of Austin Small and Minority Business Resources

The Small & Minority Business Resources Department was created by the Austin City Council to administer the Minority-Owned Business Enterprise, Women-Owned Business Enterprise and the Disadvantaged Business Enterprise programs within the City of Austin. They offer certification and compliance assistance and other resources such as marketing classes.

6.     SBA.gov Women’s Business Resources

The U.S. Small Business Administration page provides resources for women starting a business, applying for a business loan, finding government contracting opportunities and improving an existing business. The page also includes links to other national women’s business organizations.

 

Have You Seen the Statement?

A fellow lawyer recently told me about an organization that was swindled out of over $100,000 by the treasurer of the board simply because the treasurer was the only one with  access to the bank account. No one on the board had ever thought to ask to see an actual bank statement or other proof of the numbers reported at the board meeting. As a result, the offending treasurer was able to take from the organization with limited risk of exposure.

This is one of those incredibly easy problems to avoid that many people do not think about simply because we trust our fellow board members are in it for the right reasons. By requesting a copy of the bank statement on a regular basis, the board can ensure the numbers match up with the treasurer’s statement and provide just enough oversight to prevent blatant stealing. It’s an easy step for all organizations to take, not just non-profit boards.  So, when was the last time you saw an actual bank statement for your company or organization? It’s time to take another look.

The Enforceable Non-Compete Clause

Non-compete clauses in Texas have been found valid in Texas courts over the last several years. However, a business does not have carte blanche to draft a universal non-compete. There are important limitations that help balance the interests of your business and your employee’s right to work.

Per Texas Law, “A covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.” The considerations of time, geographical area, and scope of activity should reasonably reflect the work being done by the employee. Thus the non-compete clause for each employee should be specifically drafted in consideration of the role of that employee.

An additional consideration for all employers considering a non-compete clause is that there must be adequate consideration for the clause to be enforceable. One of the common forms of consideration is the disclosure of confidential information to the employee. This could include customer lists, specialized practices and procedures, trade secrets and specific strategy.  Financial consideration is typically not sufficient to support a non-compete.

 

When to Update Your Estate Plan

Beyond major life changes such as marriage, divorce, growing family, or loss of family members, there are other reasons why you need to consider reviewing and updating your estate plan. A list of some less obvious changes is below:

1.     You acquire property outside Texas

2.     A major life change for your guardians or executor (divorce, marriage, children, etc)

3.     Your children have reached the age of maturity (18 or 21)

4.     You inherit or acquire a significant asset

5.     You want to set up a trust

6.     You encounter a major financial gain or setback

7.     You became a grandparent (Congratulations!)

8.     Your assets grow to exceed the estate tax exemption

9.     You move to a different state

10.  Aging executors and guardians

Are You and Your Partners on the Same Page?

Many businesses with multiple partners operate without a formal written agreement of any kind, or a contract that only outlines the very basics of the operation. The issue I see time and time again is that these types of agreements are just fine until there is a major disagreement, and then there is no guidance or protection for what could have been a relatively easy issue to resolve. Instead, the issue snowballs and can tear a business apart.  Here is my list of ten issues to discuss and document with your partners before they become an irreconcilable disagreement. To ensure you are protected, you should always work with an attorney to enter into a contract with your partner(s). Whether your business is brand new, or has existed for many years, it is never too late to protect your interests and the business.

1.     Contingency Planning: what happens if a partner decides to leave, or is forced to leave the company?

2.     Changing the Compensation Plan

3.     Different Roles of Partners: what happens if someone isn’t doing their fair share?

4.     Hiring and Firing Employees

5.     Dissolution: how will you wrap up the business?

6.     Splitting Company Assets/Equity

7.     Strategies for Unexpected Growth

8.     Capital Contributions

9.     Vacations and Leaves of Absence

10.   Grounds for and Method of Removal or Expulsion of a Partner

Indecision and Estate Planning with Kids

I was at a four year old’s birthday party last week and another mother and I were talking about our wills. She admitted that she and her partner did not have wills, in large part because they were having a very difficult time deciding who should have custody of their son, should the unthinkable happen. Many people drag their feet when it comes to their wills. Estate planning can seem morbid and horrifically sad—something that is easy to ignore or postpone, but it is so important when you have kids.

Here is the problem: if you don’t choose a guardian, the courts will choose for you. You know your kids better than anyone. And you know their potential guardians better than anyone. It is part of your job as a parent to protect your kids, and to do what is best for them. Don’t give the power to someone else to make such an incredibly important decision.  If the court has to appoint a guardian, then all interested parties (e.g. grandparents, aunts or uncles, godparents, close family friends) will have to make their best case for why they should be the guardian of your kids. This is a heart wrenching process no matter what, but it can also cause anger and strife among a family during an incredibly difficult time.  So take some time to think about it, and then talk to an attorney to ensure your estate plan makes the proper provisions for appointing a guardian of your choosing.

Starting a New Business: How a Lawyer Can Help

Starting a new business is an incredibly exciting process. In my personal experience it is also usually accompanied by a to-do list that is eight miles long.  Legal services can get lost in that list, but there are many areas where working with a lawyer from the very beginning of your business can benefit you in both the short term and long term and (equally important) it doesn't have to cost an arm and a leg.

 

1.     What kind of entity is the best fit? A lawyer can help you navigate the vast array of entity choices for your business, and provide information specific to your business to help you determine whether a Corporation, LLC, Partnership, etc. is right for you. A lawyer also ensures that the terms of formation are specific to your business to provide more protection than a form agreement downloaded from the Internet.

2.     Do you have a Partner? A lawyer will know the questions to ask to help avoid problems later on.  Making sure you and your partner(s) are on the same page from the very beginning will help protect you all from the dreaded “business divorce” and provide a road-map for unforeseen changes as well as planned opportunities.

3.     Contracts? Are you planning to lease space? Establishing terms with vendors? Hiring employees? An attorney can draft and review these and any other contracts to protect your interests, explain the language in an agreement, and help negotiate the best terms for your business.

 

An attorney may be helpful in other areas as well, including: hiring and compensating employees, making introductions to other professionals (insurance agents, accountants, bankers, etc.) and discussing the legal implications of your strategy and business plans. If you want to discuss the particulars of your business, you can contact me at Lauren@SchoenbaumFirm.com.

DISCLAIMER:

The Schoenbaum Firm, PLLC Website and Blog are provided for informational purposes only and should not be construed as legal advice on any subject matter, nor should they be construed as creating an attorney-client relationship.