I’m Going Into Business With My Best Friend. Do We Really Need a Partnership Agreement?

Business and FriendshipI had a law partner for 3 months. She and I were not friends before we partnered, actually, but we became fast friends once we decided to do business together. About a month later, she joined my law firm.

It was temporary, though. Within a couple months, we disagreed on how to build and manage the business.

We parted ways shortly after that. It seemed amicable at first… until it came to the money. Then it got a little ugly (although we worked it out pretty quickly).

Now she won’t speak to me. Needless to say, we are not friends now.

Even though I did not know her long, I felt hurt and betrayed by several of her actions. I felt also some loss and grief.

I can only imagine how much worse this would have been had we been friends for a while beforehand. I do not think that a friendship beforehand would have prevented the problems — we simply clashed over business strategy and who was responsible for making certain decisions.

So here’s the lesson: if you want to keep your friend after going into business together, you better have all the boundaries and duties worked out and in an agreement.

Video Transcript:

I’m going into business with my best friend. Do we really have to sign a big, long, complicated, legal partnership agreement?
YES.

Relationships need boundaries — especially ones that involve money.

You may be longtime friends but business is not the same as friendship.

The fastest way to kill your friendship is by going into a business partnership without clear boundaries and responsibilities.

No matter how close you are, you will have different ideas and different expectations from one another and the business.

Contracts are not about trust. You must trust someone to do business with them, whether you have a contract or not. Contracts are about defining expectations so that no one is disappointed.

They are essential in outlining the rights and responsibilities of every person or company with whom you do any business. A contract will make your business and relationships smoother.

Do you know where your legal land mines are? To find out, call us for a Business Risk Review at 800-449-8992 or email us at [email protected].

Partnership Agreements

PARTNERSHIP AGREEMENTS

While written partnership agreements are not mandated by law, you are strongly urged to create one prior to opening your doors for business.  While you may have a positive relationship with your fellow partners and clients now, you never know what sorts of legal issues you may be confronted with in the future.  If a conflict or uncertainty ever arises, you will want to be able to refer to back to the provisions of your written agreement.  If you base your partnership on a verbal agreement and a handshake, your legal recourse will be limited should a partnership dispute or breach of contract ever take place.

Contract Form

The knowledgeable legal team at Bellatrix PC has extensive experience helping all types of partnerships select their legal structures, register with the state of California, prepare clear and detailed partnership agreements and client contracts, and negotiate effectively through conflicts.  Whether you need an aggressive litigator to represent you in a dispute over liability, or you simply need advice on getting your partnership started, our business attorneys are here to assist you.

To discuss your business’ needs in a confidential legal consultation, call the law offices of Bellatrix PC at (800) 449-8992 today.

Should You Structure Your Business Entity as a GP, LP, or LLP?

Prior to beginning the registration process, you must determine whether your partnership will be structured as a general partnership (GP), a limited partnership (LP), or a limited liability partnership (LLP).  The business formation lawyers of Bellatrix PC can help you make an informed decision.

General partners share equal liability and participate equally in the management of daily business operations.  In an LP, the general partner assumes greater managerial control and a greater share of liability than the limited partner.  In an LLP, multiple partners enjoy limited liability.  However, only certain types of businesses may be structured as LLPs, including accounting firms, law firms, and architecture firms.

Your partnership entity selection will impact not only the business registration process, but even more importantly, all matters of liability, profit distribution, and management responsibility going forward as set forth in your partnership agreement.  It is critically important to consult with an experienced business law attorney when making this decision, as your entity selection will serve as the foundation upon which every aspect of your company rests.

Steps to Registering a Partnership in California

The steps to the process of registering your partnership depend on the type of partnership you select, as described below:

  • General Partnership
    • Filing a Statement of Partnership Authority (GP-1) with the Secretary of State is optional, but recommended.  The GP-1 “specifies the authority, or limitations on the authority, of some or all of the partners to enter into transactions on behalf of the partnership and any other matter.”  The GP-1 is a short, simple form that will ask you for information like your address and the partners’ contact information.
    • Once your GP-1 is received, it will be reviewed by the Secretary of State’s Office to make sure there are no compliance issues.
    • If there are no compliance problems, your GP-1 will be filed.
    • You will receive a copy of your GP-1 for your records, as well as a Certificate of Registration.
  • Limited Partnership
    • Domestic LP – You must file a Certificate of Limited Partnership (Secretary of State Form LP-1).  This is not optional.
    • Foreign LP – You must file a Foreign Limited Partnership Application for Registration (Secretary of State Form LP-5).  The subsequent review process is similar to the process for general partnerships described above.
  • Limited Liability Partnership
    • You must file a Registered Limited Liability Partnership Registration (Secretary of State Form LLP-1).
    • If you are seeking malpractice liability coverage, you must prove your net worth by filing a Limited Liability Partnership Alternative Security Provision transmittal form (Secretary of State Form LLP-3).  This form must be accompanied by a $30 filing fee and a $15 service fee for a total of $45.
    • Your registration forms will be reviewed for compliance.  Assuming there are no issues, your forms will be filed, and you will receive a copy of your LLP-1 as well as a Certificate of Registration.

Note that all registration forms must be accompanied by a filing fee.  The filing fee is the same for GPs, LPs, and LLPs.

mergers and acquisitions business contract

What Should a Partnership Agreement Contain?

Countless web sources supply pre-made partnership agreements which use generic boilerplate language.  While these templates may seem like the simplest and most convenient option for getting started, they generally cause more harm than they prevent as they inevitably fail to make provisions for the nuances of any given business transaction or relationship.  When crafting your partnership agreement, you should always consult with an experienced business lawyer, such as those of Bellatrix PC.  Only your attorney will be able to prepare a detailed, personalized, and comprehensive contract which is structured to protect your best interests.

That being said, there are some key components which are common to most partnership agreements, regardless of the type of business the partnership is engaged in.  Generally speaking, your agreement should include provisions outlining the following elements:

  • Decision-making authority, profit division, and the distribution of partner liability.
  • How much capital each partner is expected to contribute to the business.
  • What sorts of equipment and resources will be included in the partnership’s property.
  • How financial matters will be handled, such as tax liability and bank accounts for the business.
  • How the business should be sold or dissolved if the partners wish to part ways or end the partnership.
  • What will happen if a partner dies or becomes disabled.

If you’re thinking about starting a partnership in California, or if you need assistance preparing a partnership agreement, the business law lawyers of Bellatrix PC can help.  We have years of experience providing general counsel and business risk reviews for GPs, LPs, and LLPs, and are well-versed in the nuances of state and federal law governing partner liability, tax obligations, management duties, insurance coverage, property and asset division, and other aspects of partnerships.  We are also prepared to assist with business dissolution or sale of business.

To learn more about how Bellatrix PC can help your partnership get started or resolve a dispute, call our law offices at (800) 449-8992 to arrange for a private consultation.

 

Sale of Business

SALE OF BUSINESS

In certain circumstances, selling a business can prove to be a lucrative and beneficial exit strategy. It can also be a lengthy and complicated procedure. Before you embark on this challenging process, it is critical to consult with an experienced business attorney, like the attorneys of Bellatrix PC.

handshake detail

Our legal team routinely works with partnerships, corporations, and limited liability companies across a broad spectrum of industries. We are prepared to advise and represent you on every aspect of selling your business, including preparing your entity for sale, performing due diligence, negotiating with potential buyers, and drafting and reviewing covenants not to compete, non-disclosure agreements, business sale agreements, security agreements, and other documents necessary to complete the process smoothly.

Even if you aren’t entirely sure whether it’s the right time in your entity’s life cycle to consider selling the company, our business attorneys can offer counsel on your legal options and their potential financial outcomes and ramifications. We pride ourselves on our in-depth understanding of the intricacies of the state and federal laws, and will work closely with you to identify a strategic approach toward achieving your desired outcome.

To discuss whether a sale of business is right for you, or other ways we can help you succeed, call the law offices of Bellatrix PC at (800) 449-8992.

Asset Sale vs. Stock Sale: Which is Right for Your Business?

Business sales are not one-size-fits-all. For instance, the distinction between selling stocks and selling assets should not be understated. The type of sale you enter will have a significant impact upon your tax liabilities, and in turn, your ability to benefit financially. Our attorneys will evaluate you specific situation and counsel you on the decision that is the most advantageous to you.

When you sell a company’s assets, it means that the buyer purchases your assets while you retain possession of limited liability company membership interests or corporate stocks, depending on how your entity is structured. Examples of company assets include industrial equipment, furniture and appliances, trade names, trade secrets such as software or algorithms, items included in inventory, accounts receivable, real estate, and other items. While you continue to own the company from a technical standpoint, the entity’s assets are no longer in your possession or control.

Business buyers tend to favor this type of sale. In addition to benefiting from a tax standpoint, by purchasing only the entity’s assets and not the entity itself, the buyer avoids the danger of assuming the company’s outstanding liabilities, including the company’s debts and civil liabilities like like breach of contract or sex discrimination lawsuits.

While sellers have the power to exclude from the sale any assets which they decide they would like to keep, the so-called “tax bite” generally make asset sales unfavorable to sellers. This is particularly true of C-Corporations due to their susceptibility to double-taxation. As a business seller, it is typically more favorable to make a stock sale.

Stock sales are effectively the inverse of asset sales. In other words, instead of selling the assets and keeping the corporate stock or LLC membership interests, the company continues to own the entity’s assets and you sell your stocks or LLC membership. Likewise, the pros and cons for buyers and sellers are also inverse: prospective buyers may resist accepting stock sale proposals because they are hesitant to assume the entity’s liabilities, while sellers benefit from a taxation and liability standpoint.

For all of these reasons, it is crucial to enter buyer-seller negotiations with an experienced and aggressive business sale lawyer on your side. Your attorney will protect you from inadvertently accepting unfavorable terms, and will keep you informed of the potential advantages and drawbacks throughout the negotiations process.

Due Diligence Checklist for Selling Your Company: Preparing for Buyers

Due diligence is generally associated with business buyers who must carefully appraise and evaluate a potential purchase before committing to the transaction. However, it is equally important for business sellers to prepare for the inevitable due diligence phase of the purchase and sales process. Advance preparation can make the business appear more attractive to potential buyers, and in turn, can allow you to complete the sale more rapidly and with an enhanced financial benefit. Needless to say, a seller’s failure to disclose information to a potential buyer can make even the most promising transactions turn sour. That’s why preparation is for a sale is as critical to a seller as it is to a buyer.

In order to keep the transaction as smooth and efficient as possible, sellers should gather and prepare the following documents and records:

  • LLC records or corporate books, including but not limited to, where applicable:
    • Business Ownership Certificates
    • Certificates of Good Standing
    • Corporate Meeting Minutes
    • Corporate Resolutions
  • Contracts with vendors, distributors, suppliers, customers/clients, and other businesses.
  • Trade secrets and intellectual property.  Trade secrets can potentially include any of the following:
    • Algorithms
    • Blueprints/Inventions
    • Databases
    • Marketing Strategies
    • Recipes
    • Software/Computer Programs
    • Supplier Lists
  • Tax and other financial documents, including but not limited to:
    • Balance Sheets
    • Profit and Loss Statements (“P&Ls”)
    • Tax Returns
  • Any special permits and/or licenses your business may hold, such as a liquor license or an outdoor entertainment license.
  • A breakdown of your business’ inventory.
  • Documents pertaining to real estate and property, including but not limited to:
    • Commercial Leases
    • Deeds of Trust
    • Mortgages
    • Property Liens
    • Zoning Permits

The forgoing is not a complete list, and should be evaluated on a case by case basis. If you’re ready to sell your entity, or are still thinking about whether the sale of the business could be right for you and your company, the business lawyers of Bellatrix PC can help. To start discussing your goals in a private consultation, call our law offices at (800) 449-8992 today. If a sale is not desired or appropriate for your entity, we may be able to assist with business dissolution or other alternatives.

Limited Liability Companies (LLCs) Attorney

LIMITED LIABILITY COMPANIES (LLC)

Congratulations on making the decision to start your own business! As you already know, one critical aspects of business formation is deciding which legal structure your entity will assume, i.e., a limited liability company or corporate entity. The legal structure you select significantly impacts aspects of the company’s legal and financial rights, responsibilities, and limitations throughout the duration of the entity’s existence. For instance, the legal structure you choose will impact significant matters such as personal financial liability, tax considerations, the maximum number of business members, and costs related to the legal maintenance of the business.

man shrugging

The limited liability company (LLC) enjoys widespread popularity among entrepreneurs across all types of industries because it’s “hybrid” legal structure simultaneously offers liability protection while avoiding dreaded “double taxation” issues faced by C Corporations. However, while the LLC structure has the potential to offer considerable legal and financial benefits, it is also important for new business owners to familiarize themselves with the pros and cons of operating as an LLC.

The business formation attorneys of Bellatrix PC have extensive experience assisting entrepreneurs at all stages of their business, including LLC formation, the operation process, and business dissolution or sale of the business. At Bellatrix PC we are well-versed in California and federal laws governing limited liability companies. Whether you need assistance drafting enforceable LLC operating agreements, have questions about converting an LLC into a corporation, or simply need guidance pertaining to entity selection, our knowledgeable legal team is ready to help you meet your goals.

To learn more about how we can help your LLC succeed, call our law offices at (800) 449-8992 to set up a confidential legal consultation.

How LLCs Limit Personal Liability

The limited liability company does exactly what its name suggests, limits the personal financial liability of business owners should the business itself become liable for a debt.

While creditors may pursue funds held by the entity itself, individual members enjoy robust protection against the seizure of personal assets and other collection actions. In most instances, it is illegal for creditors to pursue vehicles, homes, or other possessions held personally by LLC members in order to satisfy debts arising from business transactions. This feature makes the LLC an attractive option compared with other entities which do not limit personal liability on behalf of the individual owners, such as general partnerships and sole proprietorships.

However, while LLCs generally restrict personal liability in the event of financial hardship experienced by the business, there are several situations in which members could still potentially be held personally liable for certain debts. Entrepreneurs must be made aware that even the LLC structure will not shield a member from assuming liability if he or she:

  • Personally and directly causes personal injury and/or wrongful death, resulting in civil litigation.
  • Makes a personal guarantee regarding debt repayment.
  • Engages in fraudulent or otherwise illegal activities pertaining to the business, including but not limited to tax evasion, embezzlement, and employment tax fraud.
  • Treats the LLC as an extension of his or her personal affairs, rather than as a separate legal entity.

Tax Obligations for Limited Liability Companies

In addition to limiting their personal liability, most entrepreneurs are equally concerned with minimizing their tax liabilities. The LLC structure can be ideal in this regard.

Like S Corporations (but not C Corporations), the LLC is what’s known as a “flow-through” or “pass-through” tax entity. This term derives from the fact that income which is generated by the LLC “passes through” the LLC itself to individual members thereof. Individual members report profits and losses on individual income tax returns, thereby avoiding the double-taxation applicable to C Corporations. Unlike their pass-through counterparts, the LLC and the S Corporation, C Corporations are effectively taxed twice: first at the corporate level, and then again at the level of the individual shareholders.

While they are both pass-through entities for tax purposes, the LLC enjoys several practical advantages over the S Corporation. To provide just a few examples, LLCs are generally simpler and less costly to form than S Corps, and can have an unlimited number of members.

Single-member LLCs have special tax considerations. The IRS designates single-member LLCs as “disregarded entities” for tax purposes, meaning profits and losses must be reported on the member’s Schedule C Form 1040 (Profit or Loss from Business) just as they would be for a sole proprietorship (in fact, Schedule C is expressly designed for use by sole proprietorships.) This special tax designation means it is unnecessary to file additional taxes for the LLC itself.

If you are forming a single-member LLC and do not wish to be treated as a disregarded entity, you may elect to be treated as a corporation by filing Form 8832 (Entity Classification Election) with the IRS. If you fail to file Form 8832, the IRS will simply use the default federal tax classification. Note that LLCs with two or more members can also request re-classification as a corporation by filing Form 8832.

If you are considering forming an LLC or other type of business entity, it is critical to seek legal guidance from an experienced business attorney. It is absolutely essential to provide a robust legal framework for your LLC during its formative stages to help put your new entity on the path toward success.

The attorneys of Bellatrix PC are prepared to help you navigate formation procedures and administrative requirements, draft company policies and operating agreements which comply with both state and federal laws, and most importantly, help you take all necessary legal measures to protect your bottom line so that your new entity can flourish and grow into the future.

To arrange for a private legal consultation, call our law offices today at (800) 449-8992. Ask about our business risk review and outsourced general counsel services.

 

Mechanic’s Lien Lawyer

MECHANIC'S LIEN LAWYER

Mechanic’s liens are designed to help certain types of professionals who have rendered services to a property owner and not received payment recover fair compensation.  However, while mechanics liens can be an effective and reliable method of securing delinquent debts, the process of acquiring and attaching an enforceable lien can be daunting.  Mechanic’s liens are subject to complex and demanding legal requirements under the California Civil Code, and a single missed deadline or forgotten document could negatively impact the strength of your claim.

cranes over buildings at sunset

If you’re considering filing a mechanic’s lien in California, let the experienced business attorneys of Bellatrix PC guide you through the process.  Our knowledgeable legal team is well-versed in labor laws and matters pertaining to breach of contract, and we are prepared to aggressively defend creditors’ rights to ensure they receive fair payment for the labor and materials they supplied.  Our attorneys work closely with our clients to provide dependable legal advice and strategic representation at every stage of the lien acquisition, filing, and debt collection process.

To arrange for a private legal consultation with an experienced mechanic’s lien attorney, call the law offices of Bellatrix PC at (800) 449-8992 today.

What Are Mechanic’s Liens?

There are many different types of liens, including but not limited to tax liens, judgment liens, possessory liens, and child support liens. A lien restrains and limits what a debtor can do with the liened property. For example, a debtor with a lien on their property may be unable to sell the property until the lien is paid off and removed. From a creditor’s perspective, property liens are a reliable strategy for securing repayment from debtors who fall behind on their payment obligations, as the creditor effectively holds possession over the property until the debt is discharged.

One of the most common types of lien is the mechanic’s lien. Contrary to what the term implies, mechanic’s liens are not a remedy solely available to mechanics. There are profession-specific liens, such as design professional’s liens, which are intended for use by engineers, surveyors, and architects. However, mechanics liens are used by a wide variety of professionals.  In fact, Article XIV, Section 3 of the California Constitution grants mechanic’s liens rights to “mechanics, materialmen, artisans, and laborers of every class.”  This provision extends to a variety of suppliers and independent contractors, including both prime contractors and subcontractors.

Mechanic’s liens are used in situations where a supplier or contractor does not receive payment for improving a property.  The lien is intended to ensure compensation to the unpaid supplier or contractor for expenses stemming from repairs, materials, labor, storage, or a combination thereof.  If a lien goes unpaid, the property to which the lien is attached can even be foreclosed to satisfy the debt.

California Lien Filing Requirements: Forms, Documents, and Time Limits

Provided that you have the right to file a mechanic’s lien in the state of California in accordance with the provisions of Article XIV, Section 3 of the California Constitution, you must comply all of the filing deadlines and documentation requirements.

Filing deadlines are impacted by the professional role of the party seeking to file the lien.  The state of California imposes the following time limits:

  • Prime Contractors — You must file the lien within 60 days of filing your Notice of Completion or Notice of Cessation.  If neither of these notices have been filed, you must file the lien within 90 days of the project being completed.
  • Subcontractors and Laborers — You must file the lien within 30 days of filing your Notice of Completion or Notice of Cessation.  Once again, if neither of these notices have been filed, then you must file the lien within 90 days of the project’s completion.
  • Suppliers — See above time limits for laborers and subcontractors.

With the exception of prime contractors, all parties seeking to file a mechanic’s lien in California are first required to send a 20-Day Preliminary Notice to (1) the property owner, (2) the prime contractor, and (3) the lender.

In accordance with Cal. Civ. Code § 8416(a), in order to obtain a mechanic’s lien in California you must prepare and submit a written claim of mechanic’s lien, which must be signed by the claimant.  This written claim must include all of the following elements:

  • The name of the property owner (if known).
  • The name of the claimant’s employer or the party who hired the claimant.
  • A description of the work site which is “sufficient for identification.”
  • A statement describing the nature of the work that was performed.
  • A statement detailing the amount you are seeking “after deducting all just credits and offsets.”
  • A proof of service affidavit, which must:
    • Be signed by the person who serves the claim.
    • List the name and address of the property owner whom the claim was served on.
    • Indicate the “date, place, and manner of service,” supported by “facts showing that the service was made in accordance with [Cal. Civ. Code § 8416].”
  • A Notice of Mechanics Lien, which must include very specific copy, formatted in a very specific manner, precisely as described by Cal. Civ. Code § 8416(a)(8).

If you’re struggling to secure a payment for services your business rendered, our business lawyers can help you resolve your dispute and recover the compensation which you are owed.  To arrange for a confidential legal consultation, call the law offices of Bellatrix PC right away at (800) 449-8992.

Non-Disclosure Agreement

NON-DISCLOSURE AGREEMENTS

Non-disclosure agreements are called by many different names: NDAs, confidentiality agreements, confidential disclosure agreements, and proprietary information agreements, among other terms. Regardless of the terminology or type of business entity which is involved, all non-disclosure agreements share the same basic objective: protecting businesses against financial losses arising from the disclosure of trade secrets and confidential information. They must not be confused with non-compete agreements, which are designed for a different purpose and are of limited use in the state of California, where they are typically considered unenforceable.

Startup Tools Toolbox

Because clear and enforceable non-disclosure agreements are a dynamic and effective means of protecting proprietary information, well-constructed NDAs have proven invaluable for countless business owners and employers across a diverse range of industries, and should be included in every company’s legal toolbox. But remember, NDAs which violate state or federal laws often create more problems than they protect against.

At Bellatrix PC, our knowledgeable business attorneys have extensive experience helping start-ups, partnerships, limited liability companies, and corporations draft detailed, favorable, and enforceable non-disclosure agreements.  We pride ourselves on our sophisticated understanding of state and federal business and employment law, and will work closely with your company to determine and pursue a strategic and cost-effective means of resolving any NDA-related matter.

To schedule a confidential legal consultation, call our law offices today at (800) 449-8992.

Understanding the Difference Between Non-Compete and Non-Disclosure Agreements

As noted above, it is critical for employers and business owners to familiarize themselves with the fundamental differences which separate non-disclosure agreements from non-compete agreements. The two contracts serve different purposes, yet the terms are often transposed or mentioned in the same context, which creates confusion and misunderstandings regarding their actual purposes.

Non-compete agreements impose restrictions on a current or former employees future employment opportunities. For instance, a non-compete agreement may state that when an employee leaves Company A, that employee cannot work at a competing company for a certain period of time.  In addition, it may state that the employee cannot start a competing business for a finite period of time. Because non-compete agreements expressly restrict both competition and a person’s ability to earn a living, they are rife with potential problems and are seldom enforceable in California.

NDA’s on the other hand are designed to prevent a party, often an employee, who will be exposed to confidential, trade secret, or proprietary information  from divulging that information without expressly restricting competition or future employment. In the instance of an NDA, an employee may agree that when they leave Company A, they will not divulge or misappropriate any confidential or proprietary information obtained from Company A. Breaking the terms of a well drafted non-disclosure agreement  would expose the breaching party to substantial liability  based on breach of contract (damages for breach of an NDA are discussed in more depth later in this article). Because NDAs do not prohibit competition per se – they merely prohibit misappropriation and use of the employer’s confidential information, they do not face the same enforceability problems as non-compete agreements.

NDAs can be “mutual” (meaning two parties share trade secrets, often used when two businesses collaborate on a single project) or “one-way” (meaning only one party shares information, often used when an employer is entrusting trade secrets to an employee).

For California business owners, the important thing to remember is that NDAs do not struggle with the same enforceability issues as non-compete agreements.  Therefore, NDAs are consistently the more effective and reliable means of protecting confidential information and preserving a business advantage.

What Are Trade Secrets?

Trade secrets are as varied as the businesses who hold them.  Depending on what the entity does, trade secrets might include formulas, computer software, algorithms, recipes, databases, product designs, methods of manufacturing, businesses strategies, and other pieces of information which give the business a competitive edge.

Cal. Civ. Code § 3426.1, which is part of the Uniform Trade Secrets Act, defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process” which both (1) “derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use” and (2) “is the subject of [reasonable] efforts… to maintain its secrecy.”

While there is no bright line rule for what constitutes a trade secret, it’s safe to say that any business which has created, designed, or implemented something that gives it an economic advantage or a competitive edge should take measures to protect it.

Recovering Damages for Breach of Contract and Confidentiality Violations

The Uniform Trade Secrets Act doesn’t simply define what trade secrets are: it also sets forth potential consequences of violating a non-disclosure agreement.  Cal. Civ. Code § 3426.3(a) clearly states the following:

A complainant may recover damages for the actual loss caused by misappropriation [defined as “acquisition of a trade secret… by improper means” or “disclosure… without express or implied consent].  A complainant also may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss.

The Act also supplies some additional guidelines pertaining to civil lawsuits and compensation:

  • Even if it cannot be proven in court that misappropriation of a trade secret led to unjust enrichment or financial damages, the court can still “order payment of a reasonable royalty” for a limited period of time (see Cal. Civ. Code § 3426.3(b)).
  • If the misappropriation was “willful and malicious” (i.e. intentional and with the intent to do harm), then the plaintiff can potentially recover damages up to twice the award under Cal. Civ. Code § 3426.3(a) or Cal. Civ. Code § 3426.3(b) (see Cal. Civ. Code § 3426.3(c)).

As with any type of contract or written agreement, the use of generic boilerplate documents is a recipe for legal and financial disaster. The importance of drafting unique, customized NDAs with assistance from an experienced business lawyer cannot be overstated.  Businesses have maximum protection when they have NDAs which account for specific details and conditions unique to their business.  Using a clear, comprehensive, and tailored agreements drastically reduces the chance that the contract will be breached or found to be unenforceable in future.

Employers are urged to steer clear of the numerous generic templates available for download from the internet. NDA templates are often overbroad, unenforceable, and include non-compete clauses which violate California law. The breach of contract attorneys of Bellatrix PC have years of experience representing a broad spectrum of entities in the preparation and defense of business contracts like non-disclosure agreements and covenants not to compete. Whether you simply need assistance drafting or reviewing new or existing NDAs, or you need aggressive legal representation from a commercial litigation attorney, our team is ready to help yours

To talk more about how we can help you meet your goals and resolve your disputes, call Bellatrix PC right away at (800) 449-8992.