Protect What’s Yours in Business with Legal Documents

I recently learned of a friend who had to fire an employee for developing her own competing site using content created for her employer while on the job. She had even secretly hired her employer’s web developer and was in the advanced stages of completing this scheme.

That scary scenario reminded me of the need to protect ourselves with a few basic legal documents and procedures. I’m not an attorney and so I’m not giving legal advice, but I do offer the following very basic suggestions as a minimum to help avoid headaches later. Also, if legal action is ever required, it’s important to have consistently applied your policies to everyone to show that you created a level playing field and were not singling one person out.

1.) Create a separate legal identity for your business to divide your personal and business assets. Either form an LLC (limited liability company) or a corporation and be sure to protect this division in your financial dealings by not co-mingling personal and business finances.

2.) Keep good records of income and expenses. Hire a competent accountant and use software such as Quickbooks or Peachtree to track them.

3.) Before anyone, employee or otherwise, gets a look under the hood of your content management system, database, or proprietary system of any kind, I recommend that you have them sign a NDA (non-disclosure agreement). If they won’t sign, then don’t show.

4.) All employees, even family members working for you, should sign a non-compete agreement before starting work. The time frame for non-competes is limited by federal and sometimes state law but can extend for some time beyond the termination period so check this out to make sure your requirement is legal.

5.) Write clearly defined job descriptions, pay scales, and expectations. Have the employee sign these for a specific contracted time frame (for example, annually). When that contract ends, assuming you want to keep them on, draft a new one (or you could just change the dates). If you don’t want to keep them, then you don’t have to fire them, you just don’t renew their contract.

6.) Define who owns the data and contacts when the employee leaves. Can they, in effect, take their “Rolodex” with them when they leave? In reality, there’s only so much you can do to protect yourself in this area.

7.) Have a good attorney “on call.” By good, I mean a competent one who is an expert in his or her field. It’s advisable for your attorney to review all your legal documents and contracts as well. You might be able to save a little money on writing contracts and legal documents with legal software from NOLO.com or Intuit’s MyCorporation.com.

8.) Trademark, copyright and patent what you created. It’s easier to defend your position from these legal strongholds. Protect your rights from those who seek to infringe them.

9.) If you have to fire an employee, before you do so, deactivate all their server, database, and account access. Make sure, beforehand, that you are sufficiently backed up and protected. You’ll probably have to change passwords and maybe even get new locks on the office doors. These steps can provide a level of protection against malicious retaliation that sometimes occurs. I also recommend that you buy your domain name followed by the word “sucks” just to protect it from disgruntled people.

There’s more but these nine things provide a good start, in my opinion, and go a long way in smoothing out the bumps along the way. Please add your suggestions in the comments section below.

About Mike Allen

Founder of Shopping-Bargains, a coupon and deal source featuring nearly 5000 merchant partners in the US (plus sites for the UK and Canada too). Recipient of the Affiliate Summit Pinnacle Awards 2009 Affiliate of the Year. Learn more about my 15+ years in affiliate marketing and my other projects at Businesswright Consulting. You can find me on Twitter: @mta1.

2 Responses to Protect What’s Yours in Business with Legal Documents

  1. Good tips. It cost all some money, sure, but much less than one might think.

    It’s a business expense you should not “cut back” on. The bit money “saved” today can cost you dearly later. Consider them “insurance” like your car insurance. You would not hit the road without one, would you?

    Good post!

  2. Excellent Business Advice!