5 Tips to Avoid Legal Problems

In the course of practicing law for over 35 years, I have found that there are some actions that can be taken to avoid potential legal problems. An argument can be made that these observations are nothing more than “common sense”, but as many prophets, sages, philosophers and otherwise intelligent people have observed: Common Sense is not so common.


There are five important things you can do to avoid legal problems or minimize legal action.  It is important to communicate clearly, choose your battles, be selective as to whom you receive advise from, following through and being kind.  Following these actions may help you avoid legal problems and keep you out of court.


The first of these tips is communication.  Communication is key and should have certain elements to it. Communication of expectations ought to be established and time frames should be determined.  Clearly state when projects need to be accomplished.  It is understood that from time to time the scope of work may change, which could affect the timeline that was previously set forth.  Parties involved want to know what the change is and why.  As soon as an issue is recognized, that is relevant to your time frame, address it.  Notify the other party of the issue to let them know what has happened and what steps are being taken because of it.  It is also very important to record these expectations and time frames in writing.  One of the most important things regarding communication is the documentation.  If a matter is of great importance, a full blown contract may need to prepared, and for routine matters, a simple form may be sufficient; at a minimum, email communications and confirmations should be kept.  The more information that is in writing, the more the other party’s expectations are going to be memorialized.  It is our finding that there will be a lot less legal exposure if you’ve been forthcoming with what needs to be done when and when these expectations are documented.


Another thing that is very important is to pick your battles.  If something goes wrong, own it.  Let others know WHY you weren’t able to produce or accomplish what was necessary. It is our finding that the other party recognizes that things don’t always go as planned.  I’m not urging you to not meet deadlines or expectations, but if there is an error or reason why, own it and be sincere. It is far cheaper to say “I’m sorry”, than to hear the words “You have just been served”.  Sometimes absorbing a cost can avoid litigation on something else later on.  Do not try to cover errors or problems up.  “Glossing over” a situation is almost always worse than the problem.  It almost always invariably leads to legal problems AND trust issues.  Ultimately, a business relationship is based on trust.


The third thing is don’t take legal advice from someone who is not a lawyer.  You should not rely on how “someone else” did something.  Just because certain legal advice works for a particular situation that may be similar, that guidance may not be exactly what is needed for circumstance.  The point is you need to look at what it is you do and focus on the voodoo that you do in your line of work.  If a legal matter should arise, and you would like to avoid legal problems, involve your legal counsel. Relationships are important and with legal matters, one size does not generally fit all. It is certainly true that in our practice we utilize some base forms, but the law is not a commodity that can be sold as one for all.  There are some things that can be done with computers, websites and robots, but there is nothing that can replace the advice of a qualified, experienced lawyer.  If you don’t have the time to do it right, when are you going to have the time to do it over?


Fourth item to bring to attention is that you should do what you say it is you are going to do.  Timely performance in accordance with expectations is a great way to avoid legal problems.  This is particularly important when dealing with employees.  If you have an employee handbook, FOLLOW IT.  With an employee handbook you have certain procedures and policies, but often times they get ignored, right up until there is a problem.  The problem really occurs when you have to discharge somebody.  All of a sudden you look back at your policies and realize disciplinary actions and warnings were not followed and/or were not enforced.  It’s also important when working with another party to actually produce, do, or perform in accordance with the expectations.  Again, hopefully those expectations are memorialized in some type of contract. To the extent you do what you say you’re going to do, it will absolutely minimize legal exposure.  Something very important is to have proof of performance, which could be some type of receipt, a type of acknowledgement, or even something as simple as an email. It’s one of those things you can document and get the other party to confirm that what was required has been provided.


The last, but arguably the most important, and yet the easiest and hardest of these items is DON’T BE A JERK!   People don’t generally sue people they like working with. Whether it’s the way you conduct yourself or the way your staff acts, don’t be a jerk.  A formation of the golden rule: That which is hateful to yourself do not do to others.  If you can follow this simple maxim, you can avoid 90 – 100{7643a07be85def2dedbecc56bad3bab67e83a7c22b809f3c7a47a1fa73b8911c} of all the legal problems that could confront you in your business.


It turns out that in almost every business lawsuit, miscommunication is something that appears in one form or another.  As best you can, communicate clearly, because if it’s important enough to say, and it’s important enough to do, it’s important enough to be properly communicated.  Be honest and up front with those you work for and with.  Make sure you leave the legal work to the professionals as one person can only do so many things and do them well.  Follow through with what you say you’re going to do and DON’T BE A JERK!


For help in avoiding legal problems, contact the Kreamer Law Firm, P.C. at 515-727-0900, or at info@kreamerlaw.com.

Will You Be Personally Liable For Your Actions of Your Employees?

Are you personally liable for damages arising from the actions (whether negligent or intentional) of your employees? If one of your employees, during normal business hours, causes a serious accident while driving a company vehicle, are you (personally) liable for the damages/injuries? Are you personally liable for your business’ accounts payable to vendors, or loans from creditors?

The answers may depend, on your company’s books and records.

In virtually every state, the law provides that if the owners of the company do not follow general business protocols creditors (including people who file lawsuits) can “pierce the veil” and attribute personal liability to the owners of the company.

Your best defense to a lawsuit seeking to “pierce the veil” is to maintain good company records. This includes, but is not limited to:

  • The existence of a company Minute Book. This is the repository of the company’s records. It normally will contain not only minutes of meetings[1], but also stock[2] or membership unit ledgers[3].
  • The existence of Bylaws[4] or an Operating Agreement[5]. These documents normally address issues of business governance (including, but not limited to: who votes, the issues on which votes are taken, and how votes are counted), as well as tax issues. These documents may address relationships among the owners (buy/sell; rights of first refusal, transfers on death), but these issues are often addressed in separate documents.
  • The issuance of Stock or Unit certificates. These are tangible evidence of business ownership. Most commonly the number of shares/units is less important than the percentage of ownership of the total outstanding shares/units. Not all shares or units need be exactly alike. For instance: there could be non-voting owners who share in the economic returns, but have no “voice” in the management of the company (“silent partners”); or certain owners may have a right to a preferential return (either as to income or as to liquidation, or both).
  • Minutes of shareholder/member and director/manager meetings. Anything “material” (i.e. important and/or significant) should be documented in minutes. Determination of what is “material” will vary from business to business. Elections of directors/managers should be documented (particularly if there is a change of directors/managers). Meetings need not be held in person, or face to face. Telephonic, and/or e-meetings are becoming increasingly common. Resolutions affirming, authorizing, or directing, an action can be adopted without a meeting is the resolutions are contained in a signed document.
  • Filing of all applicable tax forms on a timely basis.
  • Absence of co-mingling of funds of the business and the owners; absence of payments of the owner’s personal expenses with company funds.

In short: if those who own and manage the business ignore business formalities, the law will ignore the separate existence of the business entity.

[1] Shareholder and director meeting minutes in the case of a corporation; member and manager meetings in the case of a limited liability company.

[2] For a corporation

[3] For a limited liability company

[4] For a corporation

[5] For a limited liability company

Kreamer Law West Des Moines, Iowa

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