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.

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.

I cannot explain how ecstatic I am about this article on the death of the billable hour.  In particular, think the following quote explains why I avoid the billable hour in most of my work.

A lawyer sells intellectual capital. The true value of which is not measured by time at all.

How does this help you, the client?  Several ways:

1. You are not writing a blank check to the firm; rather, you have a fixed and budgetable cost.
2. I, as the attorney, lack any incentive to pad hours for more profit.  Rather, the pressure is on me to complete quality work in reasonable amount of time - the attorney bears more risk than in an hourly fee arrangement.
3. The attorney must spend more time with the client outlining the problems to be solved - the result is a better relationship between attorney and client with the bonus of having each stage of work outlined with precision.

Realizing this blog is about client needs and not my ego, I must say I firmly believe that hourly rates do not connote quality of lawyer.  My goal is to be a trusted advisor to each client, a person to whom a client can come to with any issue knowing that, if I cannot help them, I will find someone who can.  Value billing allows me that ability.

Chris Moander is an independent attorney based in Milwaukee 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.

The recent economic downturn is the catalyst for a lot of people to leave their current employers - no raises, potential termination, and general unease result in folks wanting to go independent.  Aside from determining what one will do for fun and profit, locating space to work is a close second in terms of concerns.  Thus enter the commercial lease. 

Commerical leases are, in my mind, one of the harshed legal instruments out there.  Many contain provisions to the effect that tenants are responsible for maintaining the leased property no matter what the reason may be for damage. Responsibility ranges from minor repairs to flat-out complete rebuilding if the building is flattened.  Further, the mandatory insurance responsibilities of the tenant can be very large because they get to do the rebuilds and so on. 

Wisconsin views commercial leases as contracts and thus generally free of residential lease regulations.  Tenants are assumed to be sophisticated and capable of negotiating deals with landlords.  If you are about to sign a lease, consider the ramifications of binding yourself to a building that you don’t own. 

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

I will be speaking at the Wisconsin Solo and Small Firm Conference in October 2008 (next month).  It should be great fun and it will be my first time at the event.  Specifically, I will be speaking on blogging at Session 9 scheduled for 4-5 p.m. on October 24th.  Please come listen to Jon Groth, Rob Teuber, and myself - our goal is to educate our peers as much as possible on the utility of Web 2.0 and viral marketing.

Greetings, all.  I’m back and apologize for disappearing.  I plan on returning to regular blogging this week and no more disappearing acts.  I only hope any lost readers return to the flock.

Cheers!