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H t P t tY lf f th How t o Prot ectY ourself from the People y ou Trust Presented by:

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H t P t t Y lf f thHow to Protect Yourself from the People you Trustp y

Presented by:  

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Cast of CharactersBest Friends

• AliceAlice

• 52

i li• Hair stylist

• Married (before business started)

©Mad Artists │Dreamstime.com

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Cast of CharactersBest Friends

• BetsyBetsy

• 51

Sh• Shampoo Specialist 

• Married (after business started)

©M d A ti t │D ti©Mad Artists │Dreamstime.com

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Cast of CharactersBest Friends

• CarolineCaroline

• 47

i• Hair sweeper

• Unhappily married to Dave

©Mad Artists │Dreamstime.com

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Cast of Characters: BookkeepersCast of Characters: Bookkeepers

• DaveDave

• 43  unhappily     married tomarried to 

Caroline©Mad Artists │Dreamstime.com

• Bookkeeper for Friends Forever

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Cast of Characters: BookkeepersCast of Characters: Bookkeepers

• ElmerElmer

• 47

i d• Unmarried

• Betsy’s Cousin

• Replacement Bookkeeper

©Mad Artists │Dreamstime.com

p

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Facts: Friends ForeverFacts:  Friends Forever

• Alice Betsy and Caroline long time friendsAlice, Betsy and Caroline, long time friends, started a business together ten years ago.  Since Alice was talented at cutting hair BetsySince Alice was talented at cutting hair, Betsy was the queen of shampoo, and Caroline was a world‐class sweeper they decided to open aa world class sweeper, they decided to open a salon – Friends Forever.  

©Mad Artists │Dreamstime.com©Mad Artists │Dreamstime.com ©Mad Artists │Dreamstime.com

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Be Prepared: The DocumentsBe Prepared:  The Documents

• Operating Agreement –Operating Agreement– The governing document for your Company  

• Manager’s rights and dutiesManager s rights and duties

• Financial interests

• Check writing g

• Loans to company

• Succession planning

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Be Prepared: The DocumentsBe Prepared:  The Documents

Employment Agreement – governs the termsEmployment Agreement governs the terms and conditions of an employee’s employment with the Companywith the Company.

Non‐compete

N li i iNon‐solicitation

Confidential information

Paid time off

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Be Prepared: The DocumentsBe Prepared:  The Documents

• Business Succession Plan – ensures theBusiness Succession Plan ensures the smooth continuation and success of the Company in the event that the owner retiresCompany in the event that the owner retires, becomes disabled or passes away.– Buy/Sell– Buy/Sell

– Compensation

Insurance– Insurance

– Estate Plan 

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Facts: Friends ForeverFacts:  Friends Forever

• Friends Forever was an immediate success!Friends Forever was an immediate success! 

• They hired Dave 

d h i b kto do their books, 

as none of them had 

previous experience in 

owning a business Friends Forever wasowning a business.  Friends Forever was profitable and everyone was happy.  Until…

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Hypo 1: DivorceHypo 1: Divorce

• Caroline and Dave unhappilyCaroline and Dave, unhappily married for too long, finally decided they couldn’t take itdecided they couldn t take it anymore.  

• Dave contacted the local• Dave contacted the local shark lawyer and filed for divorcedivorce.  

©Mad Artists │Dreamstime.com

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Hypo 1: DivorceHypo 1:  Divorce

• If Friends Forever had planned:If Friends Forever had planned:  – Minimize litigation

Maximizes the parties’ control– Maximizes the parties  control

– Gives the Court a roadmap 

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Hypo1: DivorceHypo1:  Divorce

Friends Forever failed to plan Now what?Friends Forever failed to plan.  Now what?

• Business valuation can be complex and costly

i f i• Invasion of company privacy

• Who stays, and who goes?

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Hypo 1: DivorceHypo 1:  Divorce

• Legal Issues for Friends Forever in the event ofLegal Issues for Friends Forever in the event of a  partner’s Divorce:  – Discovery – coming up with a value for the– Discovery – coming up with a value for the business for purposes of dividing your assets.

– Dave was doing the books for Friends ForeverDave was doing the books for Friends Forever

– Dave is an employee – will he stay on?  • Ohio is At‐WillOhio is  At Will

• Employment Agreement

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Hypo 1: DivorceHypo 1:  Divorce

• Alternative Dispute ResolutionAlternative Dispute Resolution – Less complex 

Fairness– Fairness

– Agreement between parties means less disruption to businessto business

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Hypo 2: Death of a PartnerHypo 2:  Death of a Partner©Mad Artists │Dreamstime.com

"© John Takai | Dreamstime.com"

After the dust from Caroline and Dave’s divorce had settled,Friends Forever got back to business, albeit a little lighter inthe bank account than it was prior to the divorce. One day,Betsy and Caroline got a phone call. Alice was at homestyling her own hair (for once!), when she met her demise in avery unlikely, and very tragic, hairdryer incident. Betsy andCaroline did not kno hat to doCaroline did not know what to do.

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Hypo 2: Death of a PartnerHypo 2:  Death of a Partner

• If Friends Forever had planned: – Smooth transition of the businessSmooth transition of the business 

– Time to mourn rather than to think about how the business will continue.business will continue.

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Hypo 2: Death of a PartnerHypo 2:  Death of a Partner

• Friends Forever failed to plan Now what?Friends Forever failed to plan.  Now what?• Do you want to be in business with your partner’s estate?

• What if the business cannot continue without the decedent?

©Mad Artists │Dreamstime.com

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Hypo 2a: Disability of a PartnerHypo 2a:  Disability of a Partner

WHAT IF… your partner does not die, but isWHAT IF… your partner does not die, but is disabled –

• Disability provisions in your governingDisability provisions in your governing documents.

• What type of provisions do you want to include?What type of provisions do you want to include?

• Salary continuation?

• How long are you going to support your disabled partner?

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Hypo 3: Theft!Hypo 3:  Theft!• After Caroline and Dave’s divorce, and Alice’s d th C li d B t d ddeath, Caroline and Betsy needed a new bookkeeper.  Luckily, Betsy’s cousin, Elmer, 

f t t h l ki fwas a former accountant who was looking for work.  Elmer began to do the books for F i d F d it d h d iFriends Forever, and it appeared he was doing a good job, until. . . 

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Hypo 3: Theft!Hypo 3:  Theft!• Clients say credit cards were double charged

El d it i t k• Elmer assured everyone it was a mistake

• Then, Betsy gets strange bills in the mail

• Elmer stole from Friends Forever clients, AND signed up for (and maxed out!) credit cards in Betsy’s  name!

©Mad Artists │Dreamstime.com

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Hypo 3: Theft!Hypo 3:  Theft!

If Friends Forever had planned. . .If Friends Forever had planned. . . • Develop policies/procedures with advisors

• Accountants 

• Attorneys 

• Insurance Agents

• Bankers

• What to do after the fact• Call attorney for advice on legal responsibility 

• Call police

• Contact insurance carrier

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Meyers, Roman, Friedberg & LewisMeyers, Roman, Friedberg & Lewis

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Thank You!Thank You!Visit us on the web at www.meyersroman.com