During this podcast, we talk with Matt Villmer, partner at Weaver, Bennett and Bland, to learn more about what you need to know legally to start and grow your business.
Andrew: This is your host, Andrew Bowen and you’re tuning into CBR’s #B2UPodcast, bringing business resources directly to you. This podcast is brought to you by cbrbiz.com. Be sure to visit us on online for more and follow us on Twitter at @cbrbiz.
With everything entrepreneurs have to keep track of, knowing when and why to turn to an expert for legal advice might be something they forget or something they think of only when they need to do some serious legal work. But the reality is there are many, many ways legal counsel can help small business owners at any stage of their business. So it’s no surprise that today’s episode is going to cover what you need to know legally as you start and grow your business, as well as how an attorney can help you along the way. Here to talk with us about small business law today is Matt Villmer, an attorney at Weaver, Bennett, and Bland. Did I get all the names in there, Matt?
Matt: You got it just right.
Andrew: Super. So, Matt, we’re glad to have you here. Can you start off by telling our listeners a little bit about yourself and how you got here into this studio, at this very moment?
Matt: Yeah, so again, my name is Matt Villmer, I’m an attorney with Weaver, Bennett, and Bland. I moved to Charlotte about three years ago. My wife and I came down here from New York. Her family slowly I guess, migrated from Long Island, and the city of New York, down to Charlotte.
Andrew: That’s standard operating, I think, for a lot of Charlotte residents.
Matt: Right. So I just kind of followed her. I’ve been practicing law for about 10 years now. I primarily do business start-up work and contract drafting for businesses.
Andrew: Super, so we’ll just go straight into it. I have in my notes you were just named a partner?
Matt: I was, yes. That’s true.
Andrew: All right, congratulations.
Matt: Thank you, thank you.
Andrew: That was my little FYI that I had to make sure I mentioned. So that’s great. So you’ve been here a few years and your family brought you here. You covered all the basics. You’ve been working with small businesses the entire time, all 10 years?
Matt: Oh definitely. Oh yeah.
Andrew: Great. So, entrepreneurship, it runs in the family?
Matt: Oh God, yeah. My parents, they owned a furniture store for about 18 years of my life.
Andrew: What kind of furniture?
Matt: Interior design-y, furniture-y kind of place. It’s called Expressions Custom Furniture. It was like a furniture chain. It was nice, I grew up in the furniture store and did that for a lot of years and then somehow made my way to law school.
Andrew: That’s great.
Andrew: So the law school, entrepreneurship, now we get to start talking about how you fit in with entrepreneurs.
Andrew: Because once somebody has a business idea, it has to go down a certain path.
Matt: Oh yeah.
Andrew: And it’s not just, I have an idea, here I go and I’m done.
Andrew: There are your kinds of services that are really important.
Matt: Our services, some of this honestly can be done yourself. It’s probably good to contact a lawyer just to get the bases for what you need to cover. The first thing I’d say is definitely you need a form an LLC or some sort of business entity. I generally say, just form an LLC, because they’re the simplest form and you don’t have to pay a lawyer a boat load of money to go form one. So for the most part, you can file some paperwork with the Secretary of State or your lawyer can do that for you. And it creates kind of a separate legal entity that’s not you, in your personal capacity, just conducting business as you see fit. It creates kind of a separation between you and the business. So if the business ever gets in trouble, your personal assets are protected.
Andrew: That sounds very important. And LLC is one of the many types of entities, is that right?
Matt: Oh yeah, there’s LLC’s and professional corporations and corporations. There’s a lot of different things that you can form. The reason I generally say for a small start up business, if it’s just one or two or three people are starting it up, a corporation makes you issue shares of stock and makes you elect a board of directors and officers and all of these things. You have to file annual minutes. It’s kind of complex. Just form a simple LLC, get it done and don’t worry about it.
Andrew: So it’s kind of a good starting point? Can you go upward from an LLC?
Matt: You can, you absolutely can.
Andrew: It’s really just that first step in drawing the line, like you said, between your personal self and your business self.
Matt: I would agree.
Andrew: Awesome. So once an entrepreneur forms an LLC, what happens next with their business?
Matt: So the next step is to go to the bank and get yourself an LLC bank account.
Andrew: Any bank?
Matt: Any bank you want to, that’s fine. I would recommend first, the bank’s probably gonna make you show them some paperwork that shows that you have an EIN number or tax identification number. You can get one easily online through the IRS’s website. Once you show up to the bank, form that initial business bank account. You want to make sure to keep all of your business funds in that separate bank account and don’t co-mingle your personal funds and the business funds. I run across people all the time that have been operating a business for years and they generally just use their personal bank account for everything. They pay the mortgage, they pay their business expenses, they accept revenue for their business, they pay their car payment, but they do it all out of one account. The danger in that is that you’re effectively throwing away any protection that your LLC provides you, right? So if someone goes after you or sues you or you owe some debt somewhere and someone comes to collect, they can then dip their hand into your account, which has all your personal money in it.
Andrew: Just because you’ve used it that one time to write a check.
Matt: And not that one time, but keeping up kind of a high wall of separation between your personal assets and your business assets is very smart, because it doesn’t give any one of your creditors the argument that, “Well, the LLC is not a real entity, you’re just living out of it.”
Andrew: Understood. And the IRS probably appreciates it too and your taxes at the end of the year.
Matt: Your accountant will hate you if you show them bank account statements at the end of every single tax year that has all of your personal account and all of your business accounting in it. They’ll hate you. So definitely just keep them separate.
Andrew: That sounds like the next podcast if we haven’t done that already, right?
Matt: Oh, a CPA?
Andrew: There’s three people you need, an insurance guy, a lawyer guy and an accountant guy, or lady obviously.
Matt: I consider myself a lawyer guy, so…
Andrew: All right. Cool., that’s good. Also, I know a lot of entrepreneurs don’t go into business by themselves, right? If you have a great buddy, friend or acquaintance, somebody you want to go into business with, how does that work when it comes to creating an LLC with all these things?
Matt: Sure. So a lot of times, someone will pony up some money and the other person will pony up their time or some combination of the two, right? So if you have a partnership, you can still form an LLC, if it’s you or one or two other people that want to form a business together. I recommend, strongly recommend that you get an operating agreement for your LLC and basically all that does is it outlines the responsibilities of each one of the individuals who owns the business, who owns what and what percentages and it’s kind of a rainy day plan for what occurs if your business goes downhill, or someone dies or get sick, or someone wants to leave the LLC and doesn’t want to be a member anymore, what do you do? And that’s what the operating agreement does. So, just forming an LLC with a friend and saying, “Okay, well we both own it 50/50. ” If you don’t have an operating agreement I can tell you, down the road…
Andrew: I own 90 and you own 10.
Matt: That’s exactly right, you own 90, I own and 10 and you say “I never had that conversation with you. I don’t know what you’re talking about.”
Andrew: Yeah, but I remember it very clearly from the handshake that occurred afterwards, after we ate a nice steak dinner on your dime, right?
Matt: That’s right.
Andrew: So how about hiring people? Because the LLC, right, everyone’s trying to do business and hire people.
Matt: Oh yeah. So usually, if you just have a small company that’s working, a lot of times it will just be the owners, right? But that time that you turn around and you want to hire your first person, whether that’s an employee or an independent contractor, it’s really smart to have an employment agreement or an independent contractor agreement. And they don’t cost too much to go get, most lawyers charge a flat fee to just go draft one up for you and hand it to you.
Andrew: Fill in the blanks, right?
Matt: Yeah, you can then just use that with every single other employee or independent contractor that you hire in the future. I recommend using one, because now are you going to have something in writing that tells your employee what they’re going to be making, what’s their salary or what’s their benefits. What are you expecting of them? What’s their job duties and what do they have to do from day to day? Those types of things are good to put in there, especially if you’re in a service based industry. So for instance, any industry like advertising or marketing, right? Or job placement, recruiting. Those types of industries, banking. A lot of times they have non-competes, meaning after you work here for a while employee, go strike out on your own and take all my customers and clients with you and form your own business. So, with an employment agreement, you get the opportunity to put a non-compete in there that protects your own business.
Andrew: All right, so you’re mentioning the operating agreement, the employment agreement, on top of the LLC creation and you mentioned really briefly earlier about doing this online.
Matt: Oh sure.
Andrew: What’s the amount of time, like if I were to come in to the office and say “Hey, I got my idea, it’s strangely, completely fleshed out, I know exactly what I want.” Time from getting an LLC to going through with the shadow partner that I have, I guess and the employees that I don’t have quite yet versus going online and doing it.
Matt: Yeah, there are online services like, I believe, Rocket Lawyer or Legal Zoom that will give these types of agreements to you, or they’ll form the LLC for you. The issue that I see with those, there’s no problem with going and spending your money that way. The issue that I often come across are people that pay for those services, that then, through happenstance have a problem with an employee and were litigating over the employment agreement and for the first time I see it and I say, “Well, where did you get this?” and they say, one of these online services and it’s not written in a way that any lawyer worth their salt that does litigation would write it. There’s a lot of specific laws to the state of North Carolina, that if you talk to a lawyer, they’d be able to tell you those specific laws need to be accounted for in your operating agreement or in your employment agreement and a lot of times they’re just not when you go with an online service, but not to say they’re not fine, you can go with them. Some employment agreement is oftentimes better than no employment agreement, right? But nowadays, you can go to a lawyer and for a flat fee that’s not crazy expensive, they’ll draft you these agreements and, like, I in my firm, we’re happy to answer any questions anybody has when they call and we don’t really charge anything for it. Just call us up and ask us a question. If I created your agreement for you, fine give me a call. I’ll chat with you.
Andrew: Or you might be hearing from me anyways.
Matt: Yeah, I hope not, but yeah.
Andrew: Certainly not me. Doing this podcast and hearing about how to start a business, how to write a business plan, you know it’s gotten all my creative juices flowing and absolutely nothing has come of it.
Andrew: I’ll just stick with my day job, which is not hosting.
Matt: The one other thing I wanted to add on that is that in the state of North Carolina, the laws of contract interpretation, they’re kind of against the drafter. So if you drafted up a contract and it doesn’t make any sense and you have someone sign it and somehow there’s a law suit over it down the road, the Courts construe it against the person who drafted the thing.
Andrew: Makes sense, just in case you did it on purpose to make it,
Matt: Or if you draft a contract or just go on Google and paste together all the best clauses that you can find out of any contract, right? You’re going to come up with something that doesn’t make any sense. I mean it’s gonna conflict inside, it’s gonna be vague and ambiguous and courts don’t like that, they construe that against a person who drafted and often times that person is you.
Andrew: I don’t want that to be me.
Andrew: That’s really great information. Especially when it comes down to state specific things and things get lost on the internet a lot. I’m absolutely certain of that. Matt, anything else about the legal documents that we’ve talked about so far?
Matt: Yeah, I think one other question that I typically get about non-competes and this is from someone who’s leaving a business where they might have had a non-compete with a business to go start their own.
Andrew: So not an owner yet or an entrepreneur yet, but they have decided they are going to be.
Matt: That’s right, somebody who wants to be an entrepreneur. They may come to me and say, “Look at my employment agreement, look at my non-compete and tell me whether it’s enforceable in the state of North Carolina.” Basically, there are two prongs that a court looks at whenever they determine whether a non-compete is enforceable or not. The first one is geographic location. So, let’s say you work at a company that just operates in the Charlotte area and your non-compete says, if you leave for a period of, let’s say, five years, you can’t compete against us by opening up some other business or working for one of our competitors throughout the entire world. That’s not very limited in geographic scope, right? So your business operates just in Charlotte and you’re trying to prevent me from working anywhere in the world and the courts say, “No, I don’t think so, we’re not going to let you go down that road.” The second one would be, a more reasonable geographic limitation would be, the city of Charlotte or 10 miles from the company’s business address, something like that makes sense, right?
Andrew: Is that kind of service dependent too?
Matt: Yeah, some companies… I’ve looked at companies in shipping and receiving. They have an office in every major city throughout the entire country. So it depends, if you’re calling on clients in ever single one of the cities around the country, maybe it does make sense for some sort of, at least United States based non-compete, but you’d have some pretty good basis for something like that, right? The second thing that the courts look at besides geographic location would be time. So you can’t tell someone, “You can never go work for a competitor ever, until you have a foot in the grave. That’s when this agreement expires, right?” That doesn’t work, no one’s going to enforce that. Typically in North Carolina, it’s a year, two years is kind of pushing it a little bit. You can get more than two years if you have crazy, special circumstances, but by and large, courts are just willing to enforce generally up to two years of a non-compete.
Andrew: So you mentioned crazy, special circumstances, I’m really interested to hear an example of those.
Matt: I don’t know that I can give you…
Andrew: Just have to be crazy, right?
Matt: I’ve read, in some secondary sources about, maybe one or two occasions where courts in North Carolina have allowed up to five years, but it was some specialized company that did a very specialized service, of which there were no competitors, maybe just one competitor in the entire country.
Andrew: Yeah, now that makes sense.
Matt: So that’s usually the specialized circumstance.
Andrew: But five years sounds like pretty much the maximum?
Matt: Right, well two years is the maximum. Five years, that’s off the charts. You barely, if ever, see five years.
Andrew: Wow. Okay, that’s good to know too, because you never really know. I’ve heard of non-compete things, but never understood to what extent they are actually reasonable.
Matt: And see, that’s the thing. When I say contracts are construed against the drafter, so many companies will just do some Google Foo, they’ll get on Google, they’ll find a bunch of contracts and they’ll Google non-competes, they’ll copy and paste it into their contract and just have somebody sign it, and when that person wants to start up their own competing business and they come talk to me and they show me that contract, I say…
Andrew: It says 12 years.
Matt: It says 12 years and you can’t compete anywhere in the world, I say there is no way that a court is gonna tell you, oh yes, that’s enforceable.
Andrew: So all signs are pointing to call Matt before you have people sign non-competes.
Matt: Sure, that’s fine.
Andrew: Or another attorney.
Matt: Yeah, anyone is fine.
Andrew: So once my non-existent, wonderful LLC starts rolling in the dough, it’s probably because I have clients. How about taking money from people. Not taking, exchanging goods or services for money.
Matt: That sounds way better, yeah.
Andrew: It does, I won’t take anybody’s money, unless they hand it to me.
Matt: I generally tell people that they need a client service agreement, especially if you’re in the service based industry. So if you’re providing anything other than goods to somebody, have them sign an agreement. And there’s so many people that have done business for so long and say no, it’s just a handshake deal and that’s fine. Maybe you get along that way for years and years and nothing goes wrong, but given enough time, something will probably go wrong. And I’ll tell you, most people hate signing contracts. When you go to the cell phone store and you go buy, some sort of… sign a contract with a cell phone provider, there’s some 20-page agreement that you don’t read at all and you sign it and say, okay, that’s fine, right? No one likes to read a contract that says the party of the first part here-in-after contracts with the party of the second part and it’s 40 pages long. Right? So, my thoughts would be, don’t go to a lawyer or somebody that’s going to give you a contract like that and say “Oh, just hand this to all your clients and they’ll sign it.” Because they won’t, they won’t want to. And you don’t want your contract to be kind of an impediment to you doing business. So I recommend, hire somebody that will draft you a one pager, just a one page contract that says, “I’m going to give you X services, nothing else, just X services and you’re gonna get me Y payment and that’s it.”
Andrew: And the beauty of plain speak and all that too, right?
Matt: You got it.
Matt: No legal-ese.
Andrew: No legal-ese.
Matt: But there’s all kinds of little clauses that you put in there that will protect you as a business that you can just put on one page. So not only am I gonna give you X services for Y payment, there’s some jurisdictional clauses where you say, “Look, if we get into some sort of legal dispute, we’re gonna handle it right here in Mecklenburg County.” I think that’s an easy thing to put in there, where if you’re doing business with someone in some other city or some other state, Lord, they may sue you up in New York and now you’re having to defend against a lawsuit by flying back and forth to New York. If you would’ve just had a contract that said any dispute gets handled in Mecklenburg County, you’re right here in your own backyard.
Andrew: So save a lot of headaches listeners, and get contracts.
Matt: You got it.
Andrew: And agreements?
Andrew: And a legal entity?
Matt: Yes. And a separate bank account.
Andrew: And a separate bank account. Absolutely right, so my phantom business can take money. Well Matt, we’re coming to the end of our podcast. If we could have one final closing thought from you, what would it be and before you answer, in five words.
Matt: Five words, I would say hire a professional and not me, go hire anybody. Go get a CPA. That’s not five words.
Andrew: Well, my first five words were hire a professional, not me.
Matt: That’s the worst, oh my God. All right, so hire a professional, me but others. Six words.
Andrew: I think that works.
Matt: So what you need to do is you need to hire a good CPA, because most of the time when you talk to a lawyer, they’re not a CPA. They can’t answer all those intense tax based questions and go hire an insurance agent to go find the insurance that you need. But having a good lawyer in your back pocket to ask those questions to, when you come up with sticky legal issues, I think is pretty smart. Most of the time, it didn’t cost you an arm and a leg to go hire a lawyer to just answer some simple questions.
Andrew: And it will pay off in the long run?
Matt: You got it.
Andrew: By the sounds of it?
Matt: That’s it.
Andrew: Matt, so how can our wonderful listeners get more information from this superb session of our podcast?
Matt: They can go to our website at wbblawyers.com.
Matt: That’s it. Or they can give us a call at 704-844-1400.
Matt: That’s it.
Andrew: Awesome. Well yet again, I am Andrew Bowen, your host of CBR’s #B2UPodcast, bringing business resources directly to you. For future podcasts, visit us online at cbrbiz.com and follow us on Twitter @cbrbiz. Until next time, we mean business.