Doing right in business requires more than good intentions . Without good records , good intentions in business can truly be a path to perdition .
LEGALLY
Speaking
Doing right in business requires more than good intentions . Without good records , good intentions in business can truly be a path to perdition .
Doing Right … in
Business
By Lloyd W . Lowrey Jr .
“ Always do right . This will gratify some people and astonish the rest .”
Mark Twain
Whether we are dealing with family , friends , business associates or some entity , we generally expect to receive a fair return for some investment of time or money . Our laws are designed to enforce our reasonable expectations . But I have seen reasonable expectations and good intentions frustrated by poor communication and poor records . Doing right in business can often be summed up in three words , “ Write it down .”
Family and friends often get into business informally . Someone has a good idea ; a few family members or friends put in a few dollars and some time ; and they ’ re in business together . Perhaps the business is one that was inherited from earlier family members who were close and saw no need between themselves to document their respective expectations and obligations . Then the relationships change through death , incapacity or other circumstances . With inadequate records to document who should do and get what , with different memories or understandings of what is reasonable , the members of the business are on their way to mediation , arbitration or court .
What ’ s the deal ? Any record made at the time of the transaction is better than no record . Information technology makes record-keeping fairly easy and provides templates and formats , but a pen and paper will work for most normal business needs . We all forget and judges aren ’ t mind-readers . Write it down .
Do you have a partnership ? Under Section 16202 of the California Corporations Code , the association of two or more persons to carry on a business for profit as co-owners can be a partnership , whether or not the persons intend to form a partnership . I have seen people held responsible for business debts as partners when they thought they were shareholders of a corporation , because of poor record-keeping . If you want a partnership , document it . If you want a corporation or limited liability company , you should write down what you want , then consult a professional on organizing the entity .
Who ’ s in charge ? It is not uncommon for people to file Articles of Incorporation for a corporation without having bylaws or a shareholder agreement , or Articles of Organization for a Limited Liability Company without having an operating agreement . The Corporations Code supplies rules to fill in some gaps if there is no written agreement , but those rules may not be what the parties intended .
When going into business , think of yourself as a judge being asked to answer the questions of Rotary ’ s Four-Way Test : Is it the truth ? Is is fair to all concerned ? Will it build goodwill and better friendships ? Will it be beneficial to all concerned ? Will you have the evidence to answer those questions ? Do the right thing and write it down .
Lloyd Lowrey is the current President of the Rotary Club of Gilroy , past President of Leadership Gilroy , and is the shareholder in charge of the Gilroy office of Noland Hamerly , Etienne & Hoss , a professional corporation of attorneys at law . Lloyd ’ s practice emphasizes real property , water , public agencies and business and nonprofit organizations .
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