Archive for the ‘Texas Arbitration Laws’ Category

Small Business Partnership Dilemmas

Saturday, October 8th, 2011

In this day in age, people become involved with small businesses for different reasons. One person may be involved with a company is because he or she invested financially with this business. This person is known as a cash partner. On the other hand, someone may be involved with a small business because he or she provides a service of some sort to the business. A person who does this is called a service partner.

As with all business partnerships, glitches can occur. Someone who is a cash partner in a small business faces multiple risks. Each of these partners brings something to the table, or it wouldn’t be a partnership. The cash partner puts money into the business with the attempt to earn interest. The service partner brings a skill to the table and promises to use these skills or services in order to further the business. They form the company and specify their interests in the business’s legal documentation.

Problems arise if the service partner cannot follow through with his end of the deal for any reason. The cash partner does not have a plethora of options when this happens. He can 1) disperse the small business or 2) hire someone else to provide services. If the cash partner disbands the business, he ends up splitting whatever money is left with the service partner according to the terms set up in the beginning, but this leaves him possibly losing a substantial amount of money.

The second option is hiring another person to take over what the service partner was doing. This also creates more expenses, and it does not guarantee that the business will take off under this new employee. Under option two, the service partner still holds stock in the company even though he is not earning it. When looking at these two options, neither one jumps out as appealing. There are preventative measures that a cash partner can take to protect himself.

One way to do so is to insist that the service partner takes a vesting interest in the small business. This ensures that the service partner will continue to work or have a specified interest in the business after the completion of specific services or events.

These will need to be spelled out in the legal documents. In this case, the cash partner is the sole owner. This may sound unappealing to the service partner because he is supplying a skill so in most cases he would want to run it how he sees fit. There are disadvantages to vesting interest partnerships as well. The legal defining documents may not leave room to cover all situations, which poses a problem.

In this day in age you need an individual you can count on, and at the Law Offices of Thomas D. Reino you get what you see. For more information on business law, or to get business law legal council please contact us by either phone at 817.303.2133, or by fax at 972.264.0891.

How Arbitration Clauses Affect Businesses

Tuesday, September 27th, 2011

Arbitration is a way of solving conflicts through the use of a mediator. This mediator is meant to be an independent third party that is not associated with the conflict. Many companies have started adding an arbitration clause in their contracts to prevent issues from going to court. People may think that arbitration is cheaper and less messy than trying a case in front of a judge. That is not true; it has its problems. One problem with arbitration is that the arbitrator is sometimes partial. In some cases, the mediator leans in favor of his or her repeat clients.

In most cases the repeat customers are large businesses. Because situations like these arise, a court trial is an alternative that is less biased. Surprisingly, small businesses are adding their own arbitration clauses to their business contracts. This has the potential to cause problems for them. Problems come up when the customers can’t or won’t pay their debts to the small businesses.

Now, instead of simply filing a lawsuit to collect payments, companies have to pay extra money to work out an arbitration suit. Because these clauses are added, if a lawsuit is filed, the judge can order it to be settled through arbitration. When this happens, court filing fees and arbitration fees are still applied to the company. Arbitration is not necessarily the quicker or less expensive option.

Going to the courthouse and filing a suit to get a default judgment is much less of a hassle and is less expensive. It is not over after that. The small business must then file an action through court in order to collect payments. Filing this action imposes another fee on the small business. Through all this, it becomes a huge hassle to collect a debt. There are some things that small businesses can do to work out a more efficient arbitration clause in their contracts.

One option is to exempt their own debt collections from the arbitration clause when they are writing their contracts, meaning that debtors can not use arbitration as a way to solve collection issues. Arbitration has many positive outcomes and it works well for many companies, but not all. For small businesses, arbitration may need to be specified in order to have the desired results.

In this day in age you need an individual you can count on, and at the Law Offices of Thomas D. Reino you get what you see. For more information on business law, or to get business law legal council please contact us by either phone at 817.303.2133, or by fax at 972.264.0891.

Effects Arbitration Has On Small Businesses

Sunday, September 25th, 2011

Arbitration terms in a contract are something that small businesses should definitely be concerned about. Large companies use these provisions often in their contracts with smaller companies and their customers. Because large companies give arbitration companies the most business, so they come their best customers. These are the companies that provide arbitrators with repeat business. This raises problems for the small businesses and consumers that have contracts with these larger businesses.

The larger businesses have an unfair advantage because they give the arbitration companies so much use. This gives the arbitrators an opportunity to be biased. In a utopian society there would be no such prejudice, but we don’t so there is always the chance for prejudice. Naturally, it would be easy for an arbitrator to take the side of their repeat customer. It also works in the favor the arbitration company to vote in favor of their repeat customer. If they did not vote in their favor, the company wouldn’t come back and use them for mediations. It is not just partiality that is an issue in these situations.

Giving up the right to a judge and jury in a situation also hurts the small businesses. Large businesses have reputations of taking advantage or running over small businesses. When put in front of a judge and jury, small businesses can often find sympathy because people like them judge them. Many of those who have found their way into the jury suit have had run-ins with big companies that have not ended well. For this reason, juries have been known to award sizeable verdicts or punitive damages to small companies.

In the case of arbitration, the arbitrators have their own careers to think about and tend to rule in favor of the big companies. They do not have the same sympathy that jurors may have. Arbitration is not a bad thing, and it has its own place. It is often cheaper and quicker than the court system. Between companies of the same size where neither company has an advantage, it has the potential to be much less biased and in turn, more efficient option.  If you are a consumer or own a small business, arbitration clauses are something to be aware of and to watch out for.

In this day in age you need an individual you can count on, and at the Law Offices of Thomas D. Reino you get what you see. For more information on business law, or to get business law legal council please contact us by either phone at 817.303.2133, or by fax at 972.264.0891.