Absence of Malice

February 26th, 2009 Chris

A couple of friends visited me last weekend here in Miami Beach. They left on Monday and I’ve just about recovered from the varied excesses that such a weekend inevitably entails. One particular morning (er… at least when we woke up) we went out for coffee and happened to be discussing the benefits of incorporation versus not (yes – we are huge losers).

The pro’s and con’s of incorporation are pretty well documented (liability, tax treatment) and as soon as your microbusiness becomes more of a going concern (employees, office, etc…) it really is mandatory.

What really surprised me is what my buddy was told by his lawyer – that it would cost thousands to incorporate. I was pretty shocked.

Now, I want to be very clear. I have nothing against lawyers per se. I view them as any other business professional who provide a service for money. Nothing evil, no malice. But they do exist to make money – like the rest of us.

So when my friend got his verbal quote for incorporation, it probably incorporated all sorts of good stuff (shareholders agreement, minute book, name search, etc…). But the real question is do you really need all. Especially, as a micro-business owner, this comes right out of your pocket. That’s right, we’re talking beer money!

I know all the lawyers in the audience will say that there are a million and one risks unless you do everything they recommend. The way I look at it is: 1. If you’re starting a micro-business, you’ve already accepted a bunch of risks much greater than this legal stuff, and 2. My doctor keeps telling me I’m only allowed one beer a day and I don’t listen to that either.

I contrast the role of a lawyer (make money) with that of the government department here in Canada that is responsible for incorporation: Industry Canada. Their goal is to make it as easy as possible to do business ’cause that’s good for the economy. I know that sounds oximoronic, but it’s true. Canada is the #2 country in the world for ease of starting a business (see all the gory stats here).

What did we did:

• Did a name search (you can do that through Industry Canada for $20 or your lawyer) – regardless, it’s cheap.
• Went to Industry Canada where you can incorporate on-line for $200. There are several forms but they are easy to download, complete and submit.
• That’s it…

We didn’t do things like shareholder agreements (there is only Colleen and I) and corporate minutes as they simply weren’t necessary for incorporation and for our simple structure.

Having said all this, two points:

• Do talk to your accountant. There is a myriad of financial stuff that needs to be considered (like picking the right fiscal year, initial funding of the corporation, etc…) which has an immediate and material impact to your money.
• At some point, some of the things you ignore are going to need to get done. For example, after five years, we did up a corporate minute book (a record of board of director meetings, etc…). It provides a record you’ll need if you ever want to sell the business or get additional investors – and it get’s more difficult to find all the paperwork with each year that passes. But you don’t need it to start.

So, I guess the moral is that when it comes to engaging your lawyer, think of him/her like any other professional – they provide a valuable service but you need to decide what is mandatory versus nice to have.

Just like if some high-tech guy came to your office and told you that you need a double-redundant T1 line to ensure business continuity: sure it’s a nice to have and there is a risk without, but it’s money that can be more directly invested to generate revenue. ‘Cause without that, there is no business.

C.

P. S. I am not a lawyer, this is all my opinion, take all advice at own risk, always consult an attorney (huh? didn’t you just say not to?), etc…

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A Fun Fight

October 30th, 2008 Chris

First, let me apologize for my wimpiness. I’ve decided to make these postings weekly – each Wednesday. There is simply too much going on despite my best efforts to gently coast till retirement. As I’ve mentioned before I’m teaching in the local University’s MBA program and now I’ve landed a gig doing training for a large high-tech company. It’s quite a shock – having to shave and wear pants on more days than not.

But it’s not all work – last week we got to have some fun. I say fun in that I think we all occasionally enjoy catching someone doing something bad and then exposing the act for all the world to see.

In our case, it was some who had been stealing articles and letters from other sales trainers and posting it as their own material. In fact, in some cases, they had even been selling them as white papers – again all based on ripped off material.

We found out from someone who had googled an excerpt from one of Colleen’s article and found it on another trainer’s site. Then the fun began…

We did the right thing – attempting to contact the person involved to get some explanation. But none was forthcoming. In fact, in the interim, more people came forward to point out other works that this same individual had been stealing.

So this begs the question – what do you actually do? It’s pretty easy to get frothy, exclaiming that you’re going to drag this person’s ass into court and take their home, their car, their first born, etc… But it’s always important to think about how much you’re actually willing to spend (dollars and time) versus the damage being done.

Lawyers are expensive, legal action is time consuming.  You really need to think about what outcome you’re willing to pay for. For us, the biggest issue was to ensure that we’re getting credit for our own IP. We could achieve that without going directly to court. Instead, we sent of the following letter – ensuring the guilty party knew he was caught.

And it achieved exactly what we had hoped. The site that had the offending articles was taken down and I suspect Bob won’t be stealing from others any time soon.

The other benefit, it terms of getting that warm and fuzzy from making life hell for those that transgress against you, was that in the process the guy’s reputation has been trashed. As the expression goes (a la MasterCard): Suing someone in court, $1,000,000. Ruining their reputation and destroying their way of life, priceless.

Now, one problem that can occur is if someone rips you off and they aren’t held accountable. It can be seen as a dangerous precedent – showing others that they can do the same. So, you may be faced with the situation that unless you “invest” in taking legal action, you will lose more in the long run from repeat transgressions against you. In the patent world, it’s not uncommon to set a precedent by suing someone who infringes on one of your patents – just to show the world that you don’t tolerate the behaviour. Then, hopefully, you don’t have to do it again (patent lawsuits can be very expensive – $2M+).

So, keep you eyes open for people taking liberty with your intellectual property and copyright material. Once in a while, Google a common term or expression you use. If you find someone stealing from you – do something. It doesn’t have involve a trip to the courthouse but you must set the precedent.

C.

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