Wisconsin Business Law and Litigation
A blog dedicated to Wisconsin business law and business litigation matters, authored by Chris Moander of the Moander Law Firm.

Last week, Milwaukee County passed a binding referendum requiring employers to provide sick leave to all workers; eleven or more employees requires one hour of sick time per thirty hours worked (nine days a year), whereas ten or fewer employees requires only five days of sick leave.  For clarification, a referendum is "the process of referring a state legislative act or important public issue to the people for final approval by popular vote" - the voting public decides whether to apply a law as written. 

So how does this referendum affect you, a Milwaukee County business owner?  It is hard to tell this soon after the vote, but my friend, fellow attorney, and employment lawyer Mark Goldstein, of Mark J. Goldstein, S.C., outlined several possible reactions by local businesses:

                            Some employers are concerned about yet another employee-related cost that
                            cannot be passed on to customers and the administrative hassle of managing
                            yet another category of leave. Others ask if this will be a disincentive to
                            businesses that are contemplating locating, or staying, in Milwaukee
                            (Washington D.C. and San Francisco are the only municipalities with a “paid
                            time off” ordinance). Still others take a more pragmatic view, suggesting
                            they will simply reallocate time and dollars previously allocated to paid
                            vacation, paid holidays or other benefits to the new paid sick leave.

Now is the time to think and plan if you are affected by the change.

Chris Moander is an independent attorney based in Milwaukee who is passionate about helping growing business navigate the legal waters of Wisconsin.

I know it is an overused statement, but the world is smaller than ever.  Thus it is no surprise that even extremely small businesses will interact with companies outside the United States.  Naturally, cross-border relationships bring with them unique legal complexities.  A fine example of this thorny issue is the effect of U.S. treaties with other nations. 

The Constitution, in it’s Supremacy Clause, tells us that treaties (along with other laws) are the supreme law of the United States.  The Supreme Court confirmed that valid treaties override state law several times over the life of our nation, the first case (Ware v. Hylton, 3 U.S. 199) focusing on the post-revolution treaty with England.  So, it is well established that, if your business partner’s home nation has a treaty with the U.S., that treaty may have a substantive impact on both how you transact business with that business partner and the subject matter of your business relationship. 

So what if treaties override other law, including state law?  That’s the kicker for the entrepreneur.  The longer you are in business and the closer you are to your attorney, the more familiar (and comfortable) you will become with Wisconsin law.  Treaties change that familiarity - new terms and interpretations may be introduced to an agreement, or whole sections of law may be disregarded in favor of the treaty.  For example, a given nation may have a treaty with the U.S. that does not obligate any businesses from that nation to follow Wisconsin franchise law and regulations.  Normally, failure of a company to meet such requirements is a red flag to an attorney and the business owner, but a proper treaty changes the analysis.

Chris Moander is an independent attorney based in Milwaukee who is passionate about helping growing business navigate the legal waters of Wisconsin.

My friend Jon Groth has food for thought for employers and employees on election day. 

The lesson here - employers should be prepared for reduced workforce on election day(s). 

Chris Moander is an independent attorney based in Milwaukee who is passionate about helping growing business navigate the legal waters of Wisconsin.

Hanna Hasl-Kelchner, The No Nonsense lawyer, posted recently about trademarks hidden in website code, including metatags.  I can certainly see the allure because of the way Google crawls the web.  Instead of informing readers in this post, I am posing a question: What is the simplest way to scan code for these marks?  The reason I post this question is because many business owners outsource their web development to third parties and, consequently, the business many not know of or understand what is contained in their site’s code. 

Obviously it is important to know with whom you contract to create a site, but there is always value in "spot-checking" work, especially with the volume of damages available in a willful infringement case.  I look forward to getting your thoughts.

Chris Moander is an independent attorney based in Milwaukee who is passionate about helping growing business navigate the legal waters of Wisconsin.

But if this article is accurate, and I sure like to believe it is, small businesses will weather the current economic environment and potentially pull us back up.

Now, I’m not claiming now is the best time to start up (no time is ever perfect), but it feels good knowing that small business in America can thrive in most any situation.

Chris Moander is an independent attorney based in Milwaukee who is passionate about helping growing business navigate the legal waters of Wisconsin.

My friend and fellow business attorney, Ryan Roberts, recently posted several fantastic videos regarding startups.  The first two are of well-known Apple evangelist and tech guru Guy Kawasaki.  The other focuses on what is needed in a good term sheet when you pitch to VC and Angel companies.  I suspect that, if you are new to venture funding, the latter video may surprise you, but that’s good.

Thanks again to Ryan for posting such useful videos.

Chris Moander is an independent attorney based in Milwaukee who is passionate about helping growing business navigate the legal waters of Wisconsin.

Phew!  We made it through two sections of an operating agreement in my last post.  Now that you know who is a member and how profits and losses are spread, what about management?

Focus area #3 - Management

In Wisconsin, LLC’s are subject to two management schemes: a member managed structure and a manager managed structure. 

Member managed means just that - the members run the company.  For effective member management of an LLC, voting procedures are extremely important because, without voting systems, chaos rules - members get upset at other members, accusation fly, and the LLC is at risk if collapsing because nothing gets accomplished.  You can determine which matters require majority, supermajority, or unanimity for approval.  It

Committees can be established to grease the decision-making process or to handle any other internal matter (ex: operations, finances, etc).  Included in committee structures are rules on appointment, removal, and resignation of committee member - administrative stuff that demands in-place procedures.  The ability to legally bind the company must also be outlined, such as who can sign checks or contracts on behalf of the LLC - the left hand should always know what the right hand is doing in a business.

Manager managed LLC’s are quite a bit different.  A manager (or managers), selected by the members, runs the LLC.  Several points are important here: (1) how the members select the manager(s); (2) the term served by the manager(s); (3) and the authority of the manager(s).  Other relevant matters include compensation and removal processes.  In some cases, LLC’s find it useful to have a committee of managers, due to the company’s administrative and operational complexity.

Focus area #4 - Dissolution and related matters
An operating agreement outlines when the LLC will dissolve (in short, not exist any more).  Historically, Wisconsin’s statutes outlined these events, but the power was shifted to the LLC’s themselves.  Often, dissolution events include death or severe injury to a member, but there are better ways around such unfortunate events.  Buy-sell agreements can be built in to prevent the LLC from folding.  Buy-sell agreements can involve insurance policies on each member so that the LLC and the member are guaranteed some form of economic survival should inopportune events arise.  Further, the members can control who might replace the lost member and not face issues with the former member’s spouses and children.  The reality is that well-drafted language regarding events of dissociation and dissolution can prevent painful headaches and massive litigation bills if relationships crumble amongst the LLC members and managers. 

General Thoughts:

- It’s easy to get excited and move forward with a business before business matters are properly resolved.  The honeymoon between all LLC members eventually comes to an end.  Think preemptively at every turn.
- Always, always, always get things in writing; again, think preemptively.
- You will sleep better knowing that your business has procedures in place and in operation from Day 1 - reliable procedures allow a business to run more effectively.

Now, I’ve illuminated a few important areas where a good operating agreement can sustain a growing company.  There are many other areas necessary to create a good operating agreement that I left untouched.  Regardless, consider the value a good operating agreement can bring to your budding business.

Chris Moander is an independent attorney based in Milwaukee who is passionate about helping growing business navigate the legal waters of Wisconsin.

Forming an LLC, as a general rule, is pretty easy.  You contact the Department of Financial Institutions, file some paperwork, and *poof*…you have an LLC.  Actually, you don’t.  You have what amounts to an empty shell, a house with exterior walls.  Yes, you have ideas, some equipment, and maybe even funding, but the one factor, the one adverb you are missing is…how.  How will your company operate?  What is the internal machinery that will guide your company through its potentially infinite lifespan?  Enter the Operating Agreement. 

Because of the diversity in types of businesses and variety of potential markets to be accessed, operating agreements can differ drastically in content and design.  Factors such as the number of potential LLC members and the degree of business sophistication of each member can impact how an agreement is assembled.  In the next few posts, I will outline areas I think are essential to a good operating agreement.  Bear in mind that I could drone on and on about the finer details of operating agreements, but my intention here is to give some general information to show you why an operating agreement is worth getting for LLC’s with more than one member.

Focus Area #1 - Initial Capital Contribution

A good operating agreement requires a listing of issue interests and the allocation of those interests between listed members.  Period.  No debate on this.  If no record is made as to who-paid-what-and-when, huge problems arise. 

One reason I am so adamant about capital contribution descriptions is a simple one: it simplifies the dissolution process.  All the members agreed to the description, so it is clear how many shares each member owns - this accounting helps determine the internal power structure of the LLC, assuming it is member-managed versus manager managed. 

The capital contribution section can also delineate issues such as interest on capital contributions, the form of capital if it is returned to a member, or specific banking measures for each member’s capital investment.  However, the main point is make sure that each member’s capital investment is put into the operating agreement.

Focus Area #2 - Distribution of profits and losses

It is that simple.  Actually, it isn’t.  There are a number of ways to allocate profits and losses, but in doing the allocation, litigation costs are reduced and procedures solidified - time and again people want to fight over how much money they get, so why not formalize it in your operating agreement.  Further, members tend to feel better when they know the nuts and bolts of how they will get paid (assuming you are turning a profit). 

General Thoughts:

- It’s easy to get excited and move forward with a business before business matters are properly resolved.  The honeymoon between all LLC members eventually comes to an end.  Think preemptively at every turn.
- Always, always, always get things in writing; again, think preemptively.
- You will sleep better knowing that your business has procedures in place and in operation from Day 1 - reliable procedures allow a business to run more effectively.

Chris Moander is an independent attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

Two prominent conferences are going on in the Greater Milwaukee area over the next few weeks that will prove useful to the small and growing business owners and entrepreneurs.

October 4-5 is BarCampMilwaukee3, hosted at Bucketworks and sponsored by several local companies and groups.  Hopefully I will run into a few of you while I’m there. 

October 9-10 is the the Midwest Fall Business Expo 2008, sponsored by the CKME Group and a few other entities. The focus of this expo is the small and growing business, those who often cannot afford the high price of other expos.  Additionally, the event has an array of seminars and networking events.  I also hope to see some of my readers at the networking summit (October 9th from 5:30-8pm). 

Chris Moander is an independent attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.