Is it Real or Make Believe?
October 20, 2016 | Carole Clark Isakson
by Carole Clark Isakson
My daughter and I recently enjoyed the weekend Renaissance Festival.We expected to be delighted by the disguises and costumes and this event did not disappoint! The make-believe is fun and often we’re too excited to question – “ who is behind the mask?” Possibly my character, possibly my training, but I’m always curious as to what lies behind the facade, so I asked one particular long-haired-leather-wearing-sword-wielding giant of a man what he did during the week, “I sell car insurance!” he happily told me. Love it, that radical change between real and make-believe is fabulous… in the entertainment industry!
However, in the more traditional business settings disguises and make-believe can be dangerous.
All kidding aside, this is a question we need to ask ourselves in ANY business setting… with whom am I doing business? Start by asking this question with regards to your suppliers, customers, and business associates.
Suppliers may all look excellent at first, as you are greeted with professional marketing pieces and a vibrant website. But who is behind that mask? Before betting some of your company’s success on a supplier, ask some hard questions. What is the company’s financial condition? Has it been sued? Filed for bankruptcy relief? Owe taxes? Many of our attorneys can check this for you, but you can also get some of this information yourself using PACER Public Access to Court Electronic Records. Professional trade groups can also assist in vetting suppliers. In addition, we recommend that you review the suppliers agreements AHEAD of time – don’t wait to find out that they will not accept liability for damaged products, for instance.
Customers… the key to business! But if you are extending credit, you need to know if that customer is also hiding behind a mask. The inquiry is the same as you have done for suppliers; again, PACER is a good source of information. I think we can all agree that it would be better NOT to make a sale if the sale ends up being charged off for non-payment. Check out your customers, and ask the hard questions. The business attorneys at BGS can help you see through potential disguises in your business relationships, give us a call!
One of the most commonly overlooked business relationship is that which you have with the other owners of your business, your business associates. No one starts a business with another person unless he is confident that he knows who that other person really is. But it is a reality that situations, and people, change over time. The success or failure of a business can have a huge impact on your relationship with your business partners. From experience, lots of experience (across a company of experts), it is best to try to deal with that up front – while solidifying the beginning of your business, take the time to also clarify its end. Doing this requires an agreement that covers FORSEEABLE “what ifs”, including:
What if an owner wishes to retire?
What if an owner wishes to cash in on success?
What if an owner becomes too ill to work, or heaven forbid, dies unexpectedly? None of us are immortal!
Should the company have the option to buy that person’s ownership at a set price?
Should that option actually be mandatory?
Should all the owners be free to sell their ownership interests to anyone, at any time, at any price?
Do you want your business partner pledging his stock to a bank?
These are all basic questions that a business should have answered. For more information about the work I do, please see my profile page and contact me, I can assist you with these issues, as can my partner Dan Ganter . Please Contact Us if your business doesn’t have a shareholder agreement or member control agreement in place, or if you have any other questions about deciphering facades from reality in your business.