[Typical lawyer disclaimer. I am a laywer, but I am not your lawyer. Everything in this blog is for informational and entertainment purposes. This is not intended to give legal advice. We do not have an attorney-client relationship. You should always seek the advice of a lawyer for any legal issues. If you rely on this, you are foolish. Period.]
I've wanted to post some more about what it is I do (aside from bugging Dad and raising MP), and I've blogged some about it
here and
here.
What I'd like to do is sort of walk through the steps of a corporation.
Here are those steps:
1. Incorporation (entity selection, tax matters, etc.) 2a) Fundraising (not always necessary or possible)
2b) Going about your business
1) Ordinary course of business (standard contracts)
2) Recruiting and retaining employees (employment agreements, equity incentive plans)
3) Non-ordinary course of business (joint ventures, purchases)
3a) [Going public] I put this in brackets because I have never helped anyone do this and it's becoming less and less common. I won't be blogging about it.
3b) Exit strategy - i.e. selling the company in some form or fashion.
This post is the lead up to 2(b)(1) going about business. I'm going to do a post about going about your business - in other words just the typical day-to-day stuff that I help businesses with.
However, as I started mentally writing that post I realized that there was so much background information that I felt like folks needed to know, so instead of one really long post, I'm going to do a pre-going-about-your-business post. Haha, pre post.
I digress.
To give you some context with where this is going, I want to talk about contracts. But to have any understanding of what I'm talking about, you need to know about Common Law. The United States (except for Louisiana - I'll get to that) is part of a common law system.
Under common law, the role of the courts is (hold onto your hats) to
make the law and interpret it. Let's go on a mind experiment.
Say that it's the year 1875, and you are a farmer in Alabama. You own a cow. It's a prize cow. She's given birth to two calves already, is a good milker, and will probably give birth to two or more calves before her childbearing days are over.
Say that your neighbor accidentally kills your prize cow. He was shooting at some birds and didn't check his line of sight, and shot her.
You go to your neighbor and demand payment for your cow. You estimate that the cow alone is worth $25, lost milk is worth another $10 a year for 4 years, lost future calves are worth around $35.
Your neighbor refuses to pay the $100. He argues that it was an accident. He didn't intend to kill your cow, and thus he shouldn't have to pay. "Life stinks" is his response, and although he's sorry, he's not paying up.
You wait for the Circuit court to ride into town (this is rural, after all, so the judges and lawyers ride the circuit bringing the court to you). You hire a lawyer and sue your neighbor.
The court rules in your favor! Huzzah! The court rejects your neighbor's argument that he isn't responsible because the killing was unintentional. The court rules that your neighbor failed to act as a reasonably prudent person would. In other words, he was negligent.
The Alabama court just invented the doctrine of negligence. It just made the law. That's how the law developed. Case by case. Precedent by precedent. That's common law.
Now I'm being overly-simplistic. Most of the colonies adopted the common law that was developed in England, and so the doctrine of negligence is much older than the 1870's. But you (hopefully) get the idea.
There was no code set down that governed the actions between people. Instead, courts decided cases, and with each new case added to the law.
What is there besides Common Law? Civil law. Think Napoleonic Code (which is why Louisiana is a civil law state - thanks France!). Instead of the courts creating the law, case by case, the emperor (or sometimes a legislative body) states the law. For example, there would be a code stating that if a person negligently kills another persons cattle, that person must pay damages to the injured party.
Technically, the United States is becoming less and less a common law legal system. There are massive regulatory schemes in place, both at the state and federal level. But, contracts are, most often, still governed by common law.
Wait! Why are we talking about contracts? Businesses don't use contracts that often, do they? I've never entered into a contract, have I?
Oh, yes. Yes you have. Every time you buy something. Gas. A diet coke. You've entered into a contract. There may not always be a written contract (although there should be) but there's always a contract.
There are some problems with all of this. Each state has its own well-developed body of contract law. Courts have been interpreting contracts for a very long time. But, the law isn't uniform across states. Thus, very significant terms to your contract (like payment terms, termination, and even the enforceability of the contract itself) will vary depending on your state.
Lawyers and business people realized this was a big problem. It impedes commerce. Folks are hesitant to do business with someone out of state because they don't know what the law in that state is.
Lawyers have come up with a pretty good solution to this - the Uniform Commercial Code ("UCC"). The UCC is a uniform law that has been passed, in one form or another, by the legislature of all of the fifty states. Legislature trumps courts, so where the UCC applies, it overrules common law. Let me explain. No, there is too much. Let me sum up.
The UCC governs the sale of goods. So when you buy your diet coke from the grocery store, that transaction is governed by the UCC. Those terms are known, uniform, and accessible. BUT - most of my clients sell services, not goods. So when they sell you a service, what are the terms of that contract? That's governed by common law and that's the subject of the next post.
These are two college friends of mine. They were both bridesmaids in my wedding and I was a bridesmaid in both of their weddings. In fact I was pregnant with MP during the redhead's wedding. 
