Ways to Protect Your Company’s Private Information

Employees leave your business all the time, some on good terms, some on not-so-good terms. But one thing is almost always certain in either situation: many will leave with your valuable corporate information. Trade secrets, customer lists, or your business’ processes and methods that have been devised and honed throughout the years of trial and (costly) error.

Worse, many of the things and information that those departing employees have can be used against you, should they fall into the hands of your competitors or should the employee opt to go into business on her or her own.

There are ways you can mitigate that risk, and limit what a soon-to-be former employee takes and doesn’t take with them. Read on as our Chicago business litigation lawyer at Ellis Legal exmplains more.

Covenants not to Compete

A non-compete agreement is probably the first thing that comes to mind. But you may be surprised to learn that a noncompete doesn’t go very far in protecting your private, trade secret information.

The non-compete agreement is just going to limit or prohibit where a former employee works. It limits the employee him or herself—it doesn’t necessarily, by itself, limit the dissemination of your business’ private information (which can be done even if the former employee never works anywhere else again). An employee could theoretically abide by the noncompete, but still sell or distribute your private information to others.

Trade Secrets

A more comprehensive solution is to have prospective employees sign an agreement that information they are privy to during employment, is a trade secret of the business, and that it won’t be kept, used, or disseminated.

You’ll need to identify what is and what isn’t a trade secret, and simply calling something a trade secret doesn’t make it so—but certainly having any kind of trade secret agreement, whereby the employee agrees that he will not keep, disseminate, utilize or distribute your trade secrets, is better than having nothing at all.

General Confidentiality Agreements

Why would you need an overall confidentiality agreement? Because often, there are things that you want to keep confidential or private, which may not otherwise qualify as legitimate “trade secrets” under the law. 

You do have a right to ask or require that employees keep any information confidential and private, even routine things.

A confidentiality agreement also encompasses what the (former) employee says. It can ensure that the employee isn’t saying things about the company that you don’t want shared—even if that information by itself doesn’t have a lot of commercial value to competitors.

Return of Property

And you also have a right to include provisions in any of these agreements, that any property of your business, be returned to you, or destroyed, at the end of the employee’s employment with the company. Something doesn’t have to be top secret, to be considered your property, that you are entitled to have returned.

Speak with a Chicago business litigation attorney at Ellis Legal at (312) 967-7629 to see how to best protect your company’s vital and private corporate information. 

The Good Guy Guarantee Can Work for Both Sides in a Lease

Let's say that you are entering into a lease for a property with another business, and you want to ensure that you get paid. Specifically, you want to make sure that if there is a default, you will have someone or something to recover your damages against if there is a breach of the lease.

Our Chicago business litigation lawyer at Ellis Legal explains more below.

A Personal Guarantee

One common tool is the personal guarantee, which puts the signer of the contract on the hook personally and allows you to go after his or her assets, in addition to the company's assets, in the event of a default.

But a lot of people aren't willing to put their personal assets at stake and simply won't do business with you.

What About the Good Guy Guarantee? 

One way to avoid this problem is through the use of what is commonly known as a good guy guarantee (GGG), which is particularly useful in commercial leases. The tenant still signs a personal guarantee, but the lease has some extra considerations.

The GGG says that the tenant has to give written notice of the intent to terminate the lease early (something that would ordinarily be a breach of the lease). You can specify how much advance notice needs to be given.

So long as the rent is current at the time of vacating the property and the property is in good condition, there will be no breach of the lease.

Why it Works

This works for both parties for a number of reasons.

From the landlord's standpoint, because of the notice period, the landlord gets a stronger assurance that he or she will have time to find another tenant should the tenant want out. The landlord also includes extra motivation for the tenant to make sure that the rent is current and the property is being taken care of so that if the property does need to be quickly re-let in the event of the tenant vacating, there is little downtime between tenants.

The landlord also gets the benefit of knowing that there is still a personal guarantee in the event of a breach or default.

Tenants, of course, get the benefit of having an "out" in an otherwise long term commercial lease, and the security of knowing that so long as the conditions are followed, there won't be any legal action. They do sign the personal guarantee, but it's one that has a far less likelihood of being used, so long as the tenant can abide by the terms of the (now much more lenient terms than they would be) lease.

Still a Guarantee

In truth, the GGG is still a personal guarantee, But it's one that is much less likely to be used because the landlord is making some concessions in return for the personal guarantee.  

A landlord can add more conditions or concessions than the ones listed above as well—the core element, no matter what the terms are, is that the personal guarantee is signed in return for more negotiated and often tenant-friendly terms.

Problems with your commercial lease or any other business contract? Speak with a Chicago business litigation attorney at Ellis Legal at (312) 967-7629.

Some Basics of Nonprofits and Not for Profit Companies

We have all heard things about nonprofit organizations that make them a very enticing option when you are thinking about forming a new business or a new business entity. But what exactly is a nonprofit organization, and is it right for you?

Our Chicago commercial litigation lawyer at Ellis Legal explains more below.

Making Money is Allowed

One common misconception is that a nonprofit organization can't make money or that it can't make a profit. That is false; a nonprofit can and should make money. The difference is not in how much money or profit a nonprofit makes; it's in how the money is used or spent.

In a traditional company, profits of the company are used, in part, to pay the owners, managers, members, or shareholders of the company. But with a nonprofit, that cannot happen. 

A nonprofit can use profits for any other reason—for example, to expand the business, to hire new employees, to better its equipment, or simply to put away as a reserve fund or safety net in case hard times should befall the company.

Salaries

There is also a misconception that employees or owners of nonprofit companies can't make a decent salary. That is also false, and in fact, any CEOs of nonprofit organizations make a very good living. 

The only difference with a nonprofit is that employee or officer salaries cannot be tied directly to profits (that is, your income can't be more when the company makes more money; salaries must be set independent of what the company may generate at any given time), and of course, employees cannot be paid more than what would be considered fair or reasonable compensation for the services provided to the company.

Remember that in a nonprofit, your accounting must be precise, especially if you intend to take grants. Many grants require that grant money be used only for very specific purposes.

Nonprofit and Non for Profit

You may have heard people use the terms nonprofit and not-for-profit interchangeably. But they actually do have a specific legal difference.

A nonprofit organization fills a need for the general public. Think, for example, of an animal rescue shelter, an organization that provides music lessons to mentally disabled children, or an organization that helps children with cancer fulfill their wishes.

A not-for-profit is, as the name sounds, not in business to make a profit, but generally, it only serves the needs of its members. So, if a bunch of people wanted to start a local club to appreciate and share the love of the ukulele, that would not necessarily serve any overriding purpose to the general public or better society—but it is of interest to its members who started the organization not for money, but for their personal interest in the ukulele.

When it comes to tax benefits, nonprofit organizations usually provide the most benefits when it comes to donations being tax deductible. 

Thinking of starting a business or curious about what your business can and cannot legally do?  Speak with a Chicago commercial litigation attorney at Ellis Legal at (312) 967-7629 today.

Don’t Let Your Blog Get You in Trouble with the ARDC

On your website or social media page, you probably don’t think much about legal ethics or an ARDC investigation that stems from something you write on a blog. However, Illinois’ legal ethics apply to legal blogs as well, and if you are blogging or making social media posts, there are things you should keep in mind to avoid trouble with the Illinois ARDC.

The Chicago ARDC defense attorney at Ellis Legal explains more below.

Keep What You Post

The first thing to remember is that the Illinois bar requires that you keep copies of whatever you write, disseminate, or publish for three years. If you are automatically backing up your data or information, this may not be a concern for you. But if you don’t have a system to keep and preserve the things you post, you should start implementing one.

Current Lawsuits

The other thing to keep in mind is to be very careful about saying anything related to current, pending litigation or trials. There are strict bar rules about publicizing pending cases.

Bar Status

There is some authority that an attorney is not allowed to continue to post blogs or promote websites or social media pages if the lawyer is suspended from the practice of law. That applies even if the content of the communication itself doesn’t give legal advice.

Pre-Screening

In Illinois, there is no requirement that advertising material be pre-screened or pre-approved. But in other states, that may be a requirement. 

That means that if you are licensed in other states, you have a potential problem: Blog posts are dynamic, posted often, posted quickly, and can’t always practically be submitted for pre-approval by a state bar association before publication.

The best advice to avoid trouble and to avoid having blog posts pre-approved is to keep blogs informational in nature—and not more similar to an advertisement or solicitation. If the blog is a commercial transaction—an advertisement in disguise—you have few legal protections. If your blog is just your opinion about the law, discussing interesting areas of the law, or informing the general public, you have much stronger First Amendment legal protections.

Careful of Bragging

It’s always best to avoid superlatives or bragging, as that can get you in trouble with issues related to false advertising or misrepresenting your services. 

It is OK, for example, to say that you have X number of years of experience in personal injury law. But you should avoid saying that you are “the best personal injury law firm in Illinois,” something that is abstract, can’t be proven, and looks very much like advertising and commercial speech.

As a general rule, most experts say that you should go ahead and blog so long as you are smart about it. While the ultimate intent of a blog may be to promote your firm and get clients, the content of the blog itself should be focused on information—not solicitation.

We can help if your firm is in trouble with the ARDC.  Speak with a Chicago commercial litigation attorney at Ellis Legal at (312) 967-7629 today.

Don’t Ignore Those Corporate Resolutions

Corporate resolutions are like promises. They represent commitments your company makes, things that they want to do, or directions your company will go in, or they memorialize decisions that your company, its owners, directors, or shareholders make.

But why are they needed? Why don't you just make your decision on your own, without any written resolution? Why do you need a sheet of paper that says what you will or won't do, much less a sheet of paper that is debated on and voted on by your company? It seems like a lot of work and a formality that is unnecessary.

But that would be incorrect—in fact, not having, voting on, and writing corporate resolutions can wind up causing serious legal problems for your business. Our Chicago business lawyer at Ellis Legal explains more on this below.

Getting Everyone Involved

One reason resolutions help is that they show that your company, as a whole, is on board with a decision or a direction your company will take. That way, nobody can come back later and allege that an officer or director made a poor decision or did something illegal, unethical, or careless on their own.

Taxes

Resolutions can often have tax benefits. 

It may not always be clear what an expense is for, when money is brought into the company, or where it came from—these are differences that can affect how much taxes you pay. A resolution can document where money is coming from or why it's being used so you can "back up" your tax decisions to the IRS if you need to later on.

Policy and Procedure

Much like policy and procedure manuals, resolutions can serve as a guidebook, telling the world—and specifically, if needed, a court—what your company decided and that your actions were simply in accordance with your resolution.

So, for example, a resolution that declares something to be a trade secret would help in the event that someone contests whether or not that something was, in fact, a trade secret. It shows the court that you considered that something to be a trade secret.

Succession Planning

As time goes on, you may have different owners, officers, or people charged with running your company. Of course, a comprehensive succession plan is always the best idea, but resolutions can help successors see what your company did or decided, allowing for a smooth transition.

Apparent and Actual Authority

Worried about someone signing contracts on your company's behalf without your permission? You can pass a corporate resolution that says who, exactly, has the authority to sign contracts or to bind the company to promises or obligations. Later, if it turns out someone bound you to an obligation who wasn't authorized to do so, the resolution can document that the person had no authority to do what he or she did.

Speak with a Chicago business law attorney at Ellis Legal at (312) 967-7629 today about your company's policies and procedures to help keep your company out of legal trouble. 

Criticizing Judges: Don’t Cross that Ethical Line

You are probably aware that lawyer ethics rules in Illinois prohibit an attorney from saying things that insult the judiciary or that make false statements about the qualifications, morals, or character of judges and the judiciary.

This rule has a good purpose—the public must have a high and trustworthy opinion of the ethics and morals of the judiciary and have confidence that the judicial system works fairly. While it is OK to criticize a judge’s particular legal ruling, it is not OK to say things that would lower the public’s opinion about the qualifications or ethics of the judiciary.

Our Chicago ARDC defense lawyer at Ellis Legal explains more below.

What About the First Amendment? 

However, this rule can often conflict with attorneys’ First Amendment rights—many attorneys don’t know where their First Amendment right to speak out ends and where the line of an ethics violation begins.

It should go without saying that anything that could be construed as defamatory to anybody (judiciary or otherwise) would violate the bar rule that prohibits speaking out against the judiciary. 

And you cannot hide a fact as an opinion—saying “I think a judge is crooked” would most likely be a violation leading to an ARDC complaint or violation—putting “I think” before the statement doesn’t transform it into a protected statement.

Objective Back Up

But what if an attorney truly believes that a judge is crooked or biased, or the lawyer really believes some other accusation against a judge? 

Subjective belief is not enough. The lawyer making the allegation or statement that impugns a judge’s reputation must be backed up and based on objective, discernable facts that can be articulated by the attorney making the statements.

Subjective criticism almost always will lead to a complaint and an ARDC violation. For example, saying a judge is “on the take” or “corrupt” would be a violation—even if you subjectively believe that because of how a judge ruled in a particular case.

A Higher Standard

Remember that things that the public could say about a judge are different from what an attorney can legally and ethically say. Attorneys, as members of the Illinois Bar, are held to a higher standard than the public in general.  

Remember also that what may not be insulting the general public, may be insulting to the judiciary, and thus lead to a Complaint. 

For example, saying a judge “always rules in favor of banks” may seem innocuous—there’s no blatant insult in that statement. But the statement suggests that a judge is not partial, unbiased, or neutral, and thus, although not on the surface insulting, it is sufficient to impugn the good character, neutrality, and reputation of the judiciary and could lead to a complaint.

In the end, be very careful when criticizing judges. If you must do so, make sure there are objective facts to back up what you are saying and that you stay above insults and baseless allegations.

If you are facing attorney discipline, or an ethics complaint with the ARDC, we can help. Speak with a Chicago ARDC defense attorney at Ellis Legal at (312) 967-7629 today for representation before the ARDC. 

Your Corporate Minutes: Be Specific…But Not Too Specific…

You are probably aware of the need to draft and approve minutes for your corporate meetings, such as board of directors meetings, shareholders meetings, or important corporate meetings of committees.

When it comes to keeping, drafting and approving minutes, many companies see all of this as a ministerial, meaningless task—something that they "have" to do, and as a result, the effort put into drafting corporate minutes is often minimal.

But corporate minutes can have significant legal ramifications, and they are more important than you may think that they are. For more information, our Chicago business litigation lawyer at Ellis Legal explains more on this topic below.

Not So Private

Although your corporate minutes are your company's private information, that doesn't mean they are completely private. Shareholders, partners, corporate managers, or a court in a lawsuit can all request copies of your minutes—at which point, there's nothing stopping those minutes from becoming public records.

Because of that, be very careful with privileged information. Things like trade secrets or attorney-client privilege can be jeopardized if that information is too specially included in corporate minutes.

You cannot edit minutes to make your company or what is said "look better," as minutes are supposed to be just a reflection of what was actually said or done in corporate meetings. But you can draft them in ways that don't reveal more than they have to. A summary of what was discussed or a 1-2 sentence statement of the arguments for or against a position discussed should suffice.

Remember, as well, that your minutes don't represent your company's official position on any given topic—they are just a reflection of what was said at a given meeting. However, minutes that say that a given person said a given thing or took a specific position may imply, if not outright reveal, a board member's or officer's official position on a specific topic.

You Can be Vague

Your minutes do have to be specific—but not that specific.

So, while the topic discussed or the ultimate vote on an issue should be reflected, minutes don't have to be a verbatim recital of who said what. That may actually be a bad idea, as it could discourage committee or board members from being honest and forthright if they are concerned their exact positions could be revealed in corporate minutes. Minutes also don't necessarily have to reveal who voted on any given topic.

Specificity May be Good

Specificity in your minutes can sometimes help you as well. 

For example, if somebody wants to make sure they are "on the record" as taking a position or voting a certain way, they can do that. Minutes can show that your company fully deliberated, and considered all positions and considerations, before making an important decision.They can also show that procedurally, the meeting had quorum, or that it followed bylaws, when making the decisions that it made. 

Speak with a Chicago business law attorney at Ellis Legal at (312) 967-7629 today about your corporate practices and the best legal practices for your business. 

The Legalities and Significance of the Letter of Intent

You may have heard of a letter of intent (LOI). Just the name should tell you, this isn’t a contract. It’s a “letter,” and the word “intent” would indicate that you’re just saying what you intend to do in the future—not what you mean to be bound by now. 

Yet, these documents are commonly used in business transactions, so they clearly must have some legal significance. For more information, our Chicago business litigation lawyer at Ellis Legal continues below.

A Statement to the Future

As the name implies, a letter of intent is a letter that says what a party intends to do in the future, usually expressing an intention to enter into a contract in the future. 

Why not just enter into the contract now? Because in some cases, parties need more information before they enter into a contract, such as conducting research or due diligence, or perhaps some outside contingency must occur or not occur, before the parties can be truly bound.

So, in the meantime, they express their intentions through a letter of intent.

Let’s say that two parties are in talks to purchase an Illinois business. But as with any business purchase, a lot of hurdles and legwork needs to be done. The parties may need to look up liabilities or liens, review financial records, or work out financing, among all the other steps that go with purchasing a business.

So, the parties would sign a LOI that details what will happen during this due diligence period. The LOI would lay the groundwork for the parties’ duties and responsibilities during the due diligence “pre-contract” period.

Yes, You Can be Bound

The LOI is not a contract. Parties can be bound by some of the terms in the LOI. 

In our example, the LOI doesn’t obligate anybody to buy or sell the business. But it could give time limits to investigate the business, or impose strict confidentiality on the parties during the due diligence period, or require one party pay expenses related to due diligence. It could require deposit moneys, or the forfeiture of the deposit under certain conditions.

So, there are enforceable “contractual” provisions, within this LOI, which itself is not a fully binding contract. Obviously, what terms are binding and legally enforceable in a LOI, and what isn’t, is largely based on the wording of the agreement, which is why a LOI needs to be drafted carefully (and read carefully).

The Later Contract

If everything goes fine, and the parties want to continue to a full-fledged contract, the LOI will often say that the parties will negotiate and come up with that contract. Of course, nobody is obligated to sign anything. The LOI, by its nature, can’t bind someone to sign a contract that doesn’t yet exist. 

That means there is still some leeway for a party to back out of a future deal, subject to any penalty provisions that may have been written into the LOI.

Questions about the contracts related to your business transaction? We can help. Speak with a Chicago business litigation attorney at Ellis Legal at (312) 967-7629 today.

Things You May Not Have Known About Contingency Fee Arrangements

In a lot of different kinds of legal cases, a contingency fee arrangement can work for both the lawyer and the client. Contingency gives the lawyer incentive to get the best result possible and allows a client with means to have access to good legal help.

But there are ethical rules related to contingency fee agreements—rules that could get you into trouble, if they aren’t followed. Our Chicago attorney defense lawyer at Ellis Legal reviews these rules below.

Everything Must be in Writing (Not Just the Percentage)

Your contingency fee agreement must be in writing. You probably already knew that. 

However, the writing needs to say more than just what the contingency percentage is. It also must break down differing percentages based on trial or appeals (if applicable). While you may know that your fee is based on the total recovery, the client may not—your agreement needs to say whether your percentage is based on the total recovery or the recovery after expenses are deducted. 

Later Modifications

Sometimes facts and cases are fluid—the contingency fee you agreed on at the start of the case, may now seem like too little, if the case ends up being more involved, or more work, than first anticipated. 

But before you modify that agreement, think again. Many courts interpret modifications to contingency fee agreements to be based on undue influence, the lawyer having too much influence over the client once representation has begun and after the initial agreement has been signed.

Post-Judgment Domestic Enforcement

You may already know that a contingent fee dispute in a domestic or family law matter is not allowed. But what about post-judgment enforcement? Can an attorney take a contingency fee on, for example, property division that a spouse never made or alimony that is back owed and never paid?

The answer is yes, ethically and according to bar rules—the state bar has said that such an agreement does not violate the prohibition on contingency fees in domestic disputes so long as the contingency fees are based on post-judgment enforcement.

But be wary: just because the state bar has said that doing this is ethical, doesn’t mean it’s enforceable, if challenged in court, and some courts have found that such an arrangement is not enforceable by the lawyer seeking to collect the agreed upon contingency.

Unrelated to Litigation

The state bar, through the ARDC, has said that you can have a contingency fee arrangement for things that aren’t related to litigation. So, for example, you could be paid a contingency if a business deal goes through, securities get registered, or a contract gets signed.

However, always make sure some other laws (outside of the Illinois Rules of Conduct) aren’t being violated by a contingency agreement.

Always be aware that in every instance where a contingency fee is allowed, the fee must be “reasonable,” a standard that varies from case to case.

If you have a problem or issue with the ARDC, protect your law license. Let us help you. Speak with a Chicago attorney discipline lawyer at Ellis Legal at (312) 967-7629 today.

Liquidated Damages: What are They and Are They Enforceable?

If you enter into a contract, and there is a breach of that contract, you expect that your damages are whatever you lost because of the breach. And in your breach of contract case, you probably think most about whether you will win your case, not giving much thought to how much you will win—after all, it seems obvious: just read the contract and see what your damages for the breach are.

But in many cases, the amount of damages that you sustain because of a breach of contract isn’t so obvious or easy to calculate. Read on as our Chicago business litigation lawyer at Ellis Legal explains more.

Difficulty Calculating Damages

For example, imagine a scenario where someone steals your trade secrets. You don’t know who has accessed those trade secrets, and you can’t calculate how much someone else may have benefitted from the illegal use of your trade secrets. But you know that you have been damaged by the misuse and misappropriation of trade secrets.

Other things, like damage to your reputation, or someone using your likeness, or using your intellectual property, all cause you damages, but it would be hard, if not impossible, to show a court what you have lost in dollars and cents.

What are Liquidated Damages?

This is why liquidated damage clauses are used. Liquidated damage clauses are just agreed-upon amounts of damages in the event that a contract is breached. With a liquidated damage clause, you only need to show the breach of the agreement, not how much the breach has cost you, because the liquidated damage clause says what your damages are in the event that a breach is proven.

But courts don’t just allow you to put any amount in your contract as liquidated damages. To be enforceable, your liquidated damages clause has to bear some reasonable relationship to your damages, even if you can’t say that they are exactly your damages. They must be a reasonable and fair estimate or forecast of your losses in the event of a breach.

You can’t use your liquidated damages clause as a “threat” to get someone to perform by including a clearly excessive damages clause. If your liquidated damages are too excessive, they will be seen by a court as simply punishment or a penalty and, thus, will be unenforceable. 

You must also show the court that you needed the liquidated damages because damages in your case would be difficult or impossible to prove. In other words, if you can easily determine what your damages are in the event of a breach, you can’t include a liquidated damages clause.

Language in Your Agreements

In many contracts where liquidated damages are necessary, the parties will include language, agreeing that damages can’t be quantified, and agreeing that the liquidated damages amount, is fair and reasonable. While not foolproof, that can go a long way to showing a court that the liquidated damages clause is enforceable.

Don’t leave your business contracts to chance. We can help make them enforceable. Speak with a Chicago business litigation attorney at Ellis Legal at (312) 967-7629 today.

Make Sure You Have The Information You Need if You’re Buying a Franchise

Buying a franchise can be a fun, profitable business venture. A franchise can get you the help you need without having to “reinvent the wheel.” If all goes right, you are investing in an already proven successful business model, with training and some of the hard work done for you.

But franchises also carry risks and significant financial expenses. That’s why when you buy a franchise, the franchisor will need to disclose certain information to you. Franchise law can get complex, and this is by no means an exhaustive list, but here are things you should look for—or ask for—if you are considering investing in a franchise.

Read on as the Chicago business lawyers at Ellis Legal discuss the legal considerations of purchasing a franchise. 

Fees and Costs – Your fees and costs when you buy a franchise will generally fall into two categories: the initial startup fees and expenses, as well as your ongoing payments to the franchisor, as the franchise fee (which is usually a percentage of your revenue). 

Both need to be disclosed in the franchise agreement.

In addition, you’ll want to know what is covered in the franchise fee. For example, ask about the following expenses:

• Ongoing marketing costs

• Initial inventory and capital (machinery, uniforms, furniture, etc.)

• Down payments or deposits on rent or mortgages for physical property

• If training is required, expenses related to the trainings

In some cases, you can pay a hefty franchise fee, which all goes to the franchisor, thus leaving you to pay these expenses above yourself in addition to the actual startup fee.

Some franchises, especially larger ones, will offer their own financing. Make sure you know the terms of that financing, as the terms could be better or worse than terms you could get with traditional bank financing.

Lawsuits: Is your franchisor subject to lawsuits or other claims, like government actions, which could threaten its financial solubility? You don’t want to invest in a franchise only to have it declare bankruptcy six months later. 

Merchandise: In many cases, the franchisor will want you to buy your inventory, materials, and everything else, either from it or from its preferred vendors. Those may be more expensive than what you could buy them for on your own.

Obligations: Every franchise has obligations. That may be compliance with licenses, construction requirements, or finding locations for the business. Who will handle these responsibilities?

For brick-and-mortar businesses, locations can be vital. You should know whether the franchisor has market research to support whatever location you are looking to start your business at or whether you are going to be left on your own to figure out what location is best.

Exclusivity – a franchisor makes money franchising its business. It has an interest in having as many franchises as possible. You, however, don’t want someone opening the same business down the street. When you buy your business, make sure you know what area that your franchise covers—that is, what area is “protected” and considered exclusively yours.

Starting a business, including a franchise? Get the help you need to do it the right way. Speak with a Chicago business law attorney at Ellis Legal at (312) 967-7629 today.

Getting Current Employees to Sign Noncompete Agreements Can Create Problems

When you hire a new employee and want them to sign a non-compete agreement, the process is not a difficult one. A business can legally require new hires to sign a non-compete agreement as a condition of employment.

The problem comes with current hires—those who never signed a non-compete agreement at the time they started working for you, and they still work for you, and you now want them to sign a non-compete agreement.

The Chicago business lawyers at Ellis Legal delve into the issue of non-compete agreements with current employees below.

Where is the Consideration? 

The problem is that a non-compete agreement is a contract, and contracts require consideration. When a new hire signs a non-compete agreement, the consideration is the agreement to hire the employee. But what's the consideration when a current employee signs a non-compete agreement? What is the employee getting in return for his or her surrender of rights to work elsewhere at the end of employment with the company?

Many employers have used the idea that "continued employment" is the consideration. In other words, the employer agrees to keep the employee employed as consideration for the employee's signing of the non-compete agreement.

The Promise May be Illusory

But that creates a problem, at least in Illinois: Illinois is an at-will employment state. Absent violating some specific law, an employer can terminate an employee at any time. This means that the employer is technically never bound by any promise to continue to employ the employee, making the promise of continued employment in exchange for the non-compete agreement an illusory promise.

An illusory promise is a promise where one side is bound by the terms of an agreement and can be punished for violating the contract, but the other side cannot be penalized or is not bound by the terms of the agreement.

Put another way, just because the employee signed the non-compete agreement doesn't stop the employer from firing the employee a week, a day, or an hour after the agreement is signed. Thus, the employer is really not bound by anything.

Creating a Contract? 

The so-called promise of continued employment also has another problem for employers, in addition to making the non-compete agreement potentially unenforceable: it could be construed as an employment contract. 

In other words, the consideration of continued employment may transform an at-will employee to an employee with an enforceable promise from you to keep the employee employed—a promise you could now get sued for if the employee is fired or let go.

What Can You Do? 

One way around this is to think of some type of consideration that would not be illusory in return for the signing of the non-compete agreement. 

For example, a slight raise in pay, an extra vacation day, or some other work benefit that wasn't present before the agreement was signed could be the consideration that supports the signing of the non-compete agreement.

Questions about your business contracts? We can help. Speak with a Chicago business law attorney at Ellis Legal at (312) 967-7629 today.

Avoid These Social Media Mistakes Your Business Could Make

Social media is and should be an invaluable tool for your business networking needs. But like anything else, it should be wielded with caution. Many businesses make mistakes with social media that get them in legal trouble. 

Here, our Illinois commercial litigation team at Ellis Legal provides some more common mistakes and advice when dealing with your business and social media.

What You Write Matters

We tend to think that what we write on social media “isn’t real” or that it’s “just talk” and has no legal effect. It does. If you promise something to someone on Facebook or Instagram, that can be seen as a binding oral agreement. If you tell a customer something on Twitter, that customer is going to expect what you say to be or to become true.

It’s great to be responsive to customer needs or concerns on social media. Just make sure that you have a way of logging and recording what is being said, that whoever is handling social media for you is able to represent your business. You may want to consider avoiding handling major problems with clients or customers over social media.

Defamation

Once again, things written on social media have legal effects. That means that if you defame someone on social media, you can be sued for what you say. The same holds true for customers—you may have legal recourse if a customer defames you.

Removing Information or Posts

You can legally remove anything you want from your social media pages. However, suppose you remove anything that could conceivably relate to any legal matter. In that case, you must preserve whatever was posted—the picture, comment, or any text included with your post. 

Later, if there is litigation related to the post, or if the social media post has information relevant to any litigation, that post could be construed as evidence, and you could be held to have destroyed evidence if you remove and delete information that was once on a social media post.

False Advertising

Remember that social media can be seen as advertising, which obliges you to comply with advertising rules. If you are in an industry that requires disclaimers or disclosures, those may have to be posted. And, of course, if you make false advertising claims, you can be held liable for what you post.

Your best bet is to stick to puffery—things that can’t really objectively be proven or which are clearly, untrue. 

It’s fine to say you make “the best cake in the world,” which may not be true and can’t even be proven objectively, but if you told your cake was “made with organic ingredients” or “won Best Cake in the 2023 competition,” and those claims are false, you could end up in trouble.

Common Sense and Good Taste

Use good taste. Run your pictures or posts with more than one set of eyes. Be sensitive to all races, religions, sexes, sexual identities, and backgrounds. Regardless of your personal views, you don’t want the bad publicity that comes with a post that is misconstrued by the general public.

Do you need help with company policies or procedures or help keeping your business out of legal trouble? Speak with a Chicago commercial litigation attorney at Ellis Legal at (312) 967-7629 today.

What You Need to Know if You’re Buying a Franchise

So you’re thinking of buying a franchise? Franchises can be good business opportunities; you often purchase a ready-made business model with a built-in reputation. Training, support, and materials are often even provided to you by the franchisor.

But when you buy or are considering buying a franchise, you may be buying blind—especially if you are purchasing a lesser-known franchise. That’s why the law says you must be provided with a list of disclosures before purchasing the business. 

The Chicago business law attorneys at Ellis Legal explain more about franchising.

Don’t ignore those disclosures. They say important things, including some of the following.

1. Fees – The cost of a franchise isn’t cheap. For many, there will be a large initial startup fee and recurring fees that will be due for as long as you own the franchise. Some may be a set fee, and some may be based on a percentage of sales. 

There may also be fees that cover initial startup expenses, like the cost to purchase equipment needed to run the business. Fees may or may not cover the required build-out for any physical property that you buy or rent. Everything from training, phone/technical support, or marketing may also have fees associated with them.

2. Purchases- When you own a franchise, you can’t just purchase your uniforms, machinery, printing, or inventory from whomever you want. Many franchises will require you to purchase from who they want you to purchase from—even if that’s at a higher cost than where you could get the same items on your own.

3. Obligations – The obligations that you and the franchisor have must be given to you in a chart or table format. For example, who will select the site, who will fix broken equipment, or who will pay legal fees? All should be listed.

4. Competition – The last thing you want is the franchisor selling the same franchise to someone else two blocks from your location. Your agreement will dictate the restrictions on the franchisor competing against your franchise by restrictions on them selling the same business to others within a certain radius of your chosen location.

5. Financing – Some franchisors act as their own lenders, financing whatever you owe them over time. If this is offered, the financing terms must be clearly disclosed to you. Remember that whatever terms are offered may not be as favorable as financing you may get from an outside lender like a bank.

6. Legal liabilities – The franchisor must tell you if it is in any legal problems, whether it is being sued, or what its legal liabilities may be. This, of course, includes bankruptcy but also any other civil claims or government actions being taken against the company.

7. Limitations – Most franchises want things done their way. You can’t buy a Subway franchise and decide to sell pizza or have your employees all wear orange shirts. The franchise agreement will tell you what you have control over and what you don’t.

8. Working – Thinking of buying a franchise and hiring other people to run it? That may work with some franchises—but not all. Your franchise agreement will say whether the franchise expects you, personally, to be working onsite or with the business and how many hours they expect you to be there. 

Starting a business? We can help. Speak with a Chicago business law attorney at Ellis Legal at (312) 967-7629 today for any of your business law needs. 

Could an Assignment for the Benefit of Creditors Help Your Business?

Your business isn't doing very well, you have more debt than you can or want to pay off, and you are thinking it's time to close shop and move on. But you don't want to move on, saddled with debt or the loans or obligations that your business owes.

What About Bankruptcy? 

Of course, one option may be bankruptcy, but you really don't want that on your credit (even if the business' bankruptcy is not, technically, your bankruptcy). Do you have other options? It turns out that you do.

Read on as the Chicago commercial litigation attorney at Ellis Legal explains more on this below.

Sell on Your Own 

One obvious option is just to sell your business' stuff (inventory, machinery, computers, etc.) and pay off your creditors with the proceeds of the sale(s). 

But that's tougher than it sounds. You aren't in the business of selling stuff. If you own a printing press, you may know how to make shirts and printed materials, but that doesn't mean you know how to value or market the actual press that you're using.

Additionally, should you have a problem—say, a buyer of something you sold is unhappy with the purchase—you could have more legal issues in the form of lawsuits.

Assignment for the Benefit of Creditors

There is another option, called an assignment, for the benefit of creditors (ABC). Instead of you selling everything that your business owns to pay off debt, you are assigning everything that you own to a separate company that sells what you owe.

There are a number of benefits to this. The first is that companies that handle ABCs have special knowledge in various industries and know how to market and value your property to help you get top dollar for your assets, which will, in turn, make it more likely that you will be able to pay off the debt that you owe.

The ABC companies also may have relationships already with many of your creditors, which trust them, making them more likely to wait until assets are sold before they come collecting on any debt.

The other benefit is ease—you assign the property, let someone else do the work, and move on with your life.

They Take Debt, Also

In many cases, you won't just assign the assets of your company to the ABC companies—they also will accept your liabilities or debts. That means that even if the property you own doesn't pay off all of your liabilities, you still walk away debt free, the same as you might with a bankruptcy. There is no risk of selling everything the business owns and still having to owe money to accreditors.

There is only one advantage to bankruptcy over an ABC, in most cases: personal liability. If you took out a debt for the business in your own name, personally, the proceeds from what the ABC company sells won't go towards that debt.

Looking to wind down a business? Let us help you with the legal issues to let you get the fresh start you need. Speak with a Chicago, IL, commercial litigation attorney at Ellis Legal at (312) 967-7629 today.