Business Attorney | Fraser Blog

Five Stories That Matter in Michigan This Week – May 3, 2024

Michigan CRA Plans to Open State-Run Testing Laboratory

Crain’s Detroit Business reported this week that Michigan’s Cannabis Regulatory Agency plans to open a new testing lab by January of next year in order to promote and enforce safety standards. While funds have been allocated for the establishment and operation of a testing lab, CRA regulators reportedly are asking Michigan legislators to pass a bill that would give the agency more explicit authority to take this action.

Why it Matters: Having an independent, state-run lab would, according to regulators, help establish trust in products and root out potential corruption in the legal cannabis industry.

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Fraser Trebilcock Attorney Robert D. Burgee Recognized as a ‘Michigan Go To Lawyer’ for Business Transactions by Michigan Lawyers Weekly

Fraser Trebilcock attorney Robert D. Burgee has been recognized by Michigan Lawyers Weekly as a ‘Michigan Go To Lawyer’ in 2024 for business transactions. “I am honored to have been recognized by Michigan Lawyers Weekly as a ‘Michigan Go To Lawyer’ for business transactions,” said Bob.

Why it Matters: Mr. Burgee serves as Co-Chair of the firm’s Business & Tax Department and Chair of the firm’s Employee Benefits Department. He has over a decade of experience assisting business clients and entrepreneurs with startups, acquisitions, succession, and growth planning, as well as more general legal guidance, including navigating civil matters, regulatory compliance, employee benefits, and human relations. Read more.

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June Business Education Series

Most entrepreneurs and business leaders face similar frustrations – employee conflicts, lack of sales, profit woes and inadequate growth. Decisions never seem to get made, or, once made, they fail to be properly implemented. There is a solution, and it is not complicated or theoretical.

Why it Matters: The Entrepreneurial Operating System (EOS) is a practical method for achieving the business success you have always envisioned. More than 100,000 companies have discovered what EOS can do. Learn more and to register.

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Marijuana to be Rescheduled by DEA

It was announced this week that the DEA is planning to reclassify marijuana from a Schedule I drug to a Schedule III drug, following a recommendation from the Health and Human Services Department.

Why it Matters: While this move is still subject for review by the White House Office of Management and Budget, this clears a significant regulatory hurdle. Marijuana will still not be legal on the federal level for recreational use following this reclassification.

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FTC Issues Final Rule Banning Non-Compete Agreements Nationwide

On April 23, 2024, in a 3-2 vote, the Federal Trade Commission (FTC) issued a final rule banning non-compete clauses in most employment agreements nationwide. The rule is scheduled to go into effect 120 days after it is published in the Federal Register.

Why it Matters: Under the final rule, “Non-compete clause” is defined as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from: (i) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (ii) operating a business in the United States after the conclusion of the employment that includes the term or condition.” Read more from your Fraser Trebilcock attorneys.

Related Practice Groups and Professionals

Cannabis Law | Sean Gallagher
Business & Tax | Robert Burgee
Labor, Employment & Civil Rights | David Houston
Business & Tax | Andrew Martin

The Importance of a Well-Crafted Ownership Agreement for Your Business During the COVID-19 Pandemic

When times are good, many business disputes between shareholders, partners, or LLC members tend to work themselves out. If business is strong, the promise of profits brings parties to the table to settle their disagreements. To the extent one party wants out, it’s easier to come up with an equitable division of assets when business is humming. When times are tough, discord more frequently leads to business disruption. Accordingly, it’s in times like these, when the COVID-19 pandemic is wreaking havoc on the economy, that it’s important to make sure that your company’s operative documents are up-to-date and address key issues that may arise if your business experiences distress and the relationship among its owners is put to the test.

The Importance of an Ownership Agreement

You’ve heard the age-old advice before: Get it in writing. It’s imperative for every multi-owner business, no matter its structure, to have a written agreement in place that provides a framework for operating the business, making decisions, and navigating disputes among the owners.

Such an agreement, called an operating agreement, a partnership agreement, or a shareholders’ agreement depending on the business’ structure (this article will refer to such agreements, collectively, as “ownership agreements”), covers a range of important issues, including voting on important decisions, capital contributions to the company, guidelines for admitting new owners, splitting profits and debts, and the manner in which disputes between owners are to be resolved.

When a business is founded, optimism between owners is high and many overlook the importance of having a written agreement in place to address future contingencies. In some instances, owners simply use a form agreement that doesn’t address their unique circumstances.

For many business owners, operating according to a handshake deal or a poorly conceived ownership agreement works fine—until it doesn’t. Business conditions worsen. Relationships between owners deteriorate. Conditions change. And without a clear, thoughtful, and written agreement in place, owners have few means by which to resolve their differences. They are left to operate according to default rules established by state statutes, and often end up in litigation.

An ownership agreement is like an insurance policy—you don’t think you will need it, but it’s irresponsible, and potentially ruinous, not to have one in place to mitigate against risks. Once a dispute about important business issues arises, it’s too late to start thinking about conflict resolution procedures, such as those that are found in a strong, well-crafted agreement. Indeed, without an agreement in place, a dispute is much more likely to devolve into litigation since there’s no clear mechanism for brokering a resolution.

Common Provisions in an Ownership Agreement

It is important for business owners to work with an experienced business attorney to create an ownership agreement or revise an existing one. Doing so helps ensure that the agreement reflects the parties’ intent and the unique characteristics of the business. While every agreement is (or at least should be) customized to cover a business’ particular circumstances, common provisions address issues such as:

Management of the Business: Who is responsible for the management of the business? How are decisions to be made? An ownership agreement should ensure that the roles and responsibilities of the owners are clearly defined.
Meetings of the Owners: When are meetings to be held? What rules govern voting? What notice is required? By establishing clear processes and procedures for information sharing and decision making, a business can avoid disputes that often arise when an owner feels that he or she is being left in the dark.
Capital Contributions and Ownership Division: An ownership agreement should clearly identify how much capital each owner contributes to the business and how ownership of the business is allocated among the parties.
Profit Distribution: Not surprisingly, many disputes between owners result from disagreements over how and when profits are distributed.
Transfers of Ownership Interests: One of the most important provisions in any agreement is determining how ownership interests may be transferred. Often, agreements will provide that purported transfers that do not adhere to the ownership agreement are treated as void under the agreement. Many agreements also include buy-sell provisions that determine the process of buying out an owner and how the purchase price for an owner’s interest is calculated.
Termination of Ownership: Ownership Agreements should detail the terms on which the business can be terminated and how assets are distributed upon termination.
Resolving Disputes: To help avoid litigation in the event of a dispute, many agreements provide for alternative dispute resolution such as mediation and arbitration.

Is Your Business Ready for the Unexpected?

These are volatile times. It’s hard to run a multi-owner business under any circumstances, and the COVID-19 pandemic has further complicated life for all of us. It’s not uncommon for business owners to experience disharmony, but keep in mind that a dispute does not mean a business breakup is inevitable. A well-crafted ownership agreement can provide parties with a framework for resolving disputes and getting back to business. And if a separation is inevitable, an agreement can allow owners to move forward in an organized and efficient manner, without public scrutiny or costly litigation.

If your business does not have an ownership agreement in place, now is the time to focus on this important priority. If your business has an agreement but it has not been reviewed in years, now is the time to dust it off. We have significant experience assisting clients in fashioning agreements that allow their businesses to run smoothly and help them to resolve disputes without resorting to litigation. For more information, please contact one of the Business & Tax department attorneys.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Edward J. Castellani is an attorney and CPA who represents clients involved with alcohol beverages as a manufacturer, wholesaler, or retailer. He may be contacted at ecast@fraserlawfirm.com or 517-377-0845.

Top Trends in Business Law that You Need to Know for 2017

Macy’s and Kmart are each closing a Lansing location – but did you know that retail spending is up?

It’s easier than ever to collect customer data, but business owners beware: you need to protect that data or you could be on the hook for a breach.

And, get ready, driverless cars are definitely coming – and sooner than you might think!

In what has quickly grown into one of the most popular presentations in the Lansing Regional Chamber’s Small Business Education Series, Fraser Trebilcock business attorney Mark Kellogg joined a panel of experts for a rapid-fire session on top business trends for the coming year.

“Business owners are busy enough running their businesses,” said Tom Donaldson, Regional Director of the Capital Area for the Small Business Development Center. “It’s hard to keep up with everything going on in the world, too.”

To give business owners a snapshot of what’s happening now and what’s to come in 2017, area experts provided: a look at legal and business changes, financial forecasting, technology trends, a public policy preview, and what’s on the horizon in marketing for small businesses.

Administrative Law & Regulatory Changes

As with any changes in leadership on Capitol Hill, small business owners can anticipate a number of administrative law and regulatory changes ahead in 2017. Attorney Mark Kellogg said that while President Trump has not discussed his plans in detail, the President has said that he will “unburden” small business owners.

What exactly does this mean? From changes to labor and employment laws to key legislation like the Affordable Care Act (ACA), Mark said the only certainty we have is that change is coming.

Health Care Reform 2.0

Top of mind for many is health care reform. In January, President Trump signed an executive order titled, “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal”. Then, just last week, Republicans in Congress introduced the “American Health Care Reform Act of 2017” to overhaul the Affordable Care Act. The bill rolls back some of the ACA’s taxes, replaces insurance subsidies with tax credits, and makes big changes to Medicaid.

As the legislation evolves, Mark urged business owners to keep an eye on possible mandate changes, as the new administration modifies the Affordable Care Act. Updates are posted to our Fraser Trebilcock Employee Benefits Blog

Employee Overtime Rules

Changes once anticipated to labor and employment laws under the previous administration, may now be off the table. For instance, the rules that would have made more workers eligible for overtime is likely now to disappear altogether, said Mark. If the new administration decides to move forward with the change, he said the rules will likely be altered to include a lower salary cap than the original $47,476. This is something that our labor and employment attorneys will be watching closely.

Two-for-One Regulation Repeal

Another major change coming out of Washington, is a change to the process of how regulations are enacted. In an Executive order issued by President Trump, for every new regulation put into place, two old regulations must be repealed.

Attorney Mark Kellogg said this could have a big impact on emerging markets, such as drones rules and regulations. This is an area, he said, which will likely need more regulations as the technology evolves. However, in order to create these potential new regulations, the Federal Aviation Administration would need to repeal other rules.

Sick Leave Requirements

In the state of Michigan, changes to employee sick leave are also under consideration. Michigan lawmakers are debating a requirement for employers to give employees paid time off for sick leave. This could be especially critical for small business owners, Mark said. He shared that as a franchise owner himself, he will be watching this legislation closely as it develops in Lansing. With the current-make up of the State Legislature, this type of legislation may be difficult to advance at this time.

Businesses Succession & Sales

Expect to see more businesses for sale in 2017.

“10,000 people a day in the U.S. are turning 65,” said Mark, and as baby boomer business owners retire, we are finding that many do not have succession plans in place. Mark said that he has closed on three business sales transactions in just the last month and a half, a trend he expects to continue. He elaborates further in a recent article.

Data Security

Data breach incidents continue to make headlines, and unfortunately this is a trend not likely to go away in 2017. Any company that stories sensitive information, like customer credit card data, driver’s license numbers, or social security numbers, is susceptible to theft. Mark explained that it’s important to have a plan in place in case that data is compromised. Michigan has specific breach notification requirements under Michigan’s Identity Theft Protection Act that all businesses, regardless of size, must follow. These steps are outlined for you in a recent blog post.

Marketing Tips

Despite the security considerations, data collection is more important now than ever, added panelist Amanda Stitt of Change Media Group. Collecting and using data about customers adds to the creation of more personalized marketing, she explained. For example, companies can create ads that target returning customers and then use data to make sure only returning customers will see that ad. If you have ever put something in your online shopping cart and decided not to buy it, then been haunted by advertisements for that product elsewhere online, you have experienced this kind of targeted advertising. She said that messaging has to be more authentic and demonstrate the values of the company, pointing to the 2017 Super Bowl ads as examples. And, If you’re a fan of long-form writing, you’re in luck. Amanda said we will see a resurgence in longer videos, news articles, and even social media posts.

Public Policy Preview

Public Sector Consulting’s Chief Executive Officer Jeff Williams gave a deeper dive into upcoming public policy changes. This year, watch for major changes to come out of Washington. In the last several decades, he explained, we have seen the executive branch of government take more power; expect the legislative and judicial branches to respond with a push for a more equal division.

Next year, he believes the biggest changes for Michigan business owners will happen at the state and local levels. The state will elect a new governor, lieutenant governor, attorney general, and many new legislators, while Lansing will elect a new mayor. No matter where on the political spectrum you fall, Jeff said, it’s going to be a wild two years for all of us.

Technology: Protection is Key

Changes in technology have historically driven the evolution of business. Personal computers and the internet have forced most companies to move online, to change marketing and business strategies, and more. Now, according to Matt Scott of Dewpoint, business will begin driving changes in technology. As companies face the need to get more work done faster, more accurately, and at a lower cost, we can expect to see the tech sector working to create the products needed to make that possible.

Companies are also evolving the way they seek to solve problems. Matt believes that in 2017, more companies will look to outside tech experts to tell them how to develop new strategies, and to demonstrate what tech tools are needed to accomplish new goals. In that same vein, more businesses are looking to outsource complicated IT problems to technology specialists, instead of relying on in-house IT employees. All of these changes in technology will require small business owners to become more and more invested in technology.

Optimistic Economic Outlook

Fifth Third Bank Vice President Tom Ruis says there is a lot to be optimistic about with our current economy. Consumer confidence is up, as are retail sales and the stock market. What about big box stores closing locations? That’s all a part of the growth in online sales instead of the traditional storefront, he said, so don’t let it trick you into thinking that retails sales are down.

Tax reform that would reduce income taxes could help consumer spending increase even more, Tom said. Interest rates will probably increase slightly over the next year, and loans will get a little more expensive, he said, but he doesn’t think it will have a dramatic impact on small businesses.

One exciting innovation that’s closer to your driveway than you might think – self-driving cars.

“If you just bought a car, your next car will be almost fully automated in terms of parking and other features,” Tom said. He says virtual reality is making it much easier for automotive companies to test self-driving technology, and that will make road-ready versions available sooner than you might think. “Overall, this is a very positive, exciting time.”

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Fraser Trebilcock is proud to co-sponsor the Business Education Series, along with Fifth-Third Bank. Programs are free for members of the Lansing Regional Chamber of Commerce. Click HERE to view upcoming events.

Attorney Mark E. Kellogg has devoted his nearly 30 years of practice to the needs of family and closely-held businesses and enterprises, business succession, and estate planning. In addition, Mark is a certified public accountant. Contact Mark at 517.377.0890 or mkellogg@fraserlawfirm.com.