The Truth About Why I “broke up” with Twitter

That’s it… I’m stopping cold turkey.

No more Twitter.

I’ve been trying to be more active on social media, reach out to my clients in new and unique ways (at least for me), but Twitter is just one tool that I’ve given up on.  Yes, I announced with great fanfare not too long ago that I was everywhere on Social Media, but I think you’ll understand why I’m no longer on Twitter. Continue reading “The Truth About Why I “broke up” with Twitter”

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Three Lease Issues That Can Kill a Business Deal

When my client decided to sell her business, she thought most of the issues would revolve around agreeing on the ultimate purchase price, and minimizing any claims the Buyer could make against her after the sale.  However, it turned out, lease issues posed the biggest problems. Continue reading “Three Lease Issues That Can Kill a Business Deal”

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Book Review of The Power of Habit: Why We Do What We Do in Life and Business

One of the most talked about books over the past year is the New York Times bestseller, The Power of Habit: Why We Do What We Do in Life and Business by Charles Duhigg.

I read this book because I was interested in utilizing habits to reduce the numerous decisions I have to make every day. Every decision I was making reduced my ability to make the next decision. This became quite obvious when I arrived home one night and my lovely wife asked me some very basic questions. I simply replied that I had no energy to answer them right now because I was making too many decisions all day long. The epiphany: the more decisions we make, the more energy we have to use, reducing our ability to make clear and effective decisions later in the day. But, by using habits, we reduce the mental energy we need for simple issues, and reserve our energy for more complex matters.

Duhigg first discusses how habits work, how to create new habits, and why we are able to create new habits. Habits emerge because the brain is constantly looking for ways to save effort. This book discusses how habits emerge and why they are so powerful. They are based on the same three step loop: the cue, the routine, and the reward.

But this book is more than just about changing an individual’s habits, it discusses how to implement key habits within an organization so they’re all working toward the same goal. One of the best ideas that I believe came out of this book was the fact that creating “keystone habits,” in other words, “small wins” have enormous power. Once these small wins occur, it sets in motion forces that favor additional small wins that keep building upon one another. It’s not too different from the law of physics that says “a body in motion, stays in motion, and a body at rest, stays at rest.” Once you start creating small wins, they will naturally build on one another to create greater and greater impact on the organization. In creating these keystone habits, the author discusses case studies taken from various companies showing how the habits created structure in an organization, provided a routine for employees to follow when they weren’t sure what to do, and gave employees a sense of ownership in the progress of the business.

The book discusses not only how habits are created, but also how to change habits. The author declares that to modify habit, you must decide to change it. There has to be a conscience decision to accept the difficulty and hard work of creating new cues, routine, and rewards. Thank you Captain Obvious. I’m looking for something a little more practical; his comments are a little too highbrow and cerebral. 

I’m looking for something a little more practical; his comments are a little too highbrow and cerebral. 

For me to change habits, I need it spelled out clearly and concisely what steps I need to take, andhow to implement these changes. Maybe that just my simple mind at work.

This is an excellent book for understanding the social psychology and science behind habits, but I felt it was lacking in the practical application. However, with the idea of habits now being at the forefront of creating more efficient businesses, and even more efficient workers, there will be no shortage of books on this topic in the future, as well as reading fodder in blogs.

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Do Your Non-Solicitation Agreements Pass Muster?

The recent case Saturn Wireless Consulting, LLC v. Aversa in New Jersey sheds more light on how non-solicitation clauses will be interpreted.

Here’s the story (“CliffsNotes” version): Saturn Wireless hired Aversa. A Confidentiality, Non-Solicitation, and Non-Compete Agreement was signed by Aversa.  Aversa quit and set up a competing shop (outside of the non-compete radius).  Saturn Wireless sued, in part, for breach of the non-solicitation provision of the contract.

In this case, the non-solicitation clause stated an employee was prohibited from solicitation activity or contacting customers “for the purpose of diverting work or business.”

The court gave a divided ruling, some benefiting Aversa and some benefiting Saturn Wireless. Continue reading “Do Your Non-Solicitation Agreements Pass Muster?”

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Big Head and Proud

A person with a big head is defined by the Merriam-Webster Dictionary as “an exaggerated opinion of one’s importance” and by the Cambridge Dictionary as “someone who thinks that they are more important or cleverer than they really are.” Suffice to say there are many other definitions of “being big headed,” but these get the point across.

Me and my “Big Head”

Most lawyers at one time or another have been accused of having a big head. It’s a common problem among our profession. In fact, I was recently accused of having a big head. But I wear this accusation with a badge of honor. You see, I’m a proud member of the Big Head Corps that marches in the Thanksgiving Day Parade.

The Big Head Corps is a group of people who help raise money for the Thanksgiving Day Parade and have an opportunity to march down Woodward Avenue with a huge paper mache big heads on them. This past year, I had the amazing opportunity and experience to do this with my daughter. My daughter’s the one with the big ears, and I’m the one with the elegant smoking jacket. I must admit, I had not been down to the parade in at least 15 years. So, when I decided to actually be a Big Head, I was not sure what the experience or the crowd would be like. Would the weather be frigid? Would my neck hurt for days afterward from carrying the head? Would I topple over head first?
Continue reading “Big Head and Proud”

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2 Examples of How Divorce Effects Beneficiary Designations

In the first case, Estate of Mark E. Patrick v. Wendy Freedman, Wendy had relinquished all claims she had to Mark’s life insurance as part of their divorce judgment. However, Mark never changed the beneficiary designation on his life insurance policy.

When he died, the plan administrator properly and lawfully paid the proceeds to Wendy who was still named as beneficiary. Of course, the estate beneficiaries went after Wendy to repay these funds.

They eventually prevailed but this whole court case could have easily been avoided if Mark had simply changed his beneficiary designation as part of his estate plan after the divorce.


Photo via Foter.com

In the second case, In Re Estate Of John Lett, John’s wife, like Wendy, gave up all rights to his life insurance as part of the divorce decree.

However, after becoming deficient in payment of a home loan they agreed to be jointly liable for, John agreed to name his spouse as 100% beneficiary of a life insurance policy just in case he never paid off his share of the loan.  Although after he paid off the loan, he never changed the insurance beneficiary so when he died John’s ex-wife collected.

This time, the Michigan Court of Appeals said because Lett named his ex-wife as beneficiary AFTER the divorce decree, she was entitled to this life insurance policy. Another case of beneficiary designations gone awry.

These two cases only reinforce my continuous words of caution: always, always, always review and update your beneficiary designations to make sure they are consistent with your goals, objectives, and life conditions.

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The One Big Reason I Hate Employee Leasing Companies

While there are many reasons I don’t like employee leasing companies, the IRS just added another big one to my list. In a recent IRS Office of Chief Counsel Ruling 20171201F, the IRS ruled that the taxpayer was on the hook for employment taxes that were left unpaid by a Professional Employer Organization, or “PEO” (aka an employee leasing company).


Photo credit: Andrew Huff via Foter.com / CC BY-NC

Many small businesses use a PEO to handle all of their payroll, HR, Worker’s Compensation insurance issues, and other matters related to employing staff. Under the structure, all of the company’s “employees” are actually hired by the PEO and then leased back to the taxpayer. Most contracts between a PEO and a taxpayer state that they act in a co-employer relationship.

These PEO contracts also usually state the PEO is responsible for payment of the employment tax liability. However, if the PEO doesn’t pay the employment taxes, the IRS doesn’t simply accept the contract terms and assess liability against the PEO. Rather, the IRS analyzes this issue under Internal Revenue Code Section 3401(d)(1) to determine whether the leased employees are truly “employees” of the taxpayer and not the PEO. In almost all cases, the IRS will rule that the taxpayer is the employer and not the PEO. As a result, ultimate responsibility for the payment of employment taxes is still on the taxpayer.

As a result, ultimate responsibility for the payment of employment taxes is still on the taxpayer.

The IRS has recognized the problem with this position and it subsequently led to the enactment of the Tax Increase Prevention Act of 2014 (TIPA) that a “certified PEO” would be liable for the employment taxes. The requirements for a certified PEO were released in January of this year and can be found here.

The IRS Chief Counsel office, in ruling that the taxpayer was still the employer of the staff, looked at the language in the contract, the fact that all money used to pay the wages came from the taxpayer, and that if the contract was terminated for any reason the taxpayer was still responsible for the payment of wages, salaries, and employment related taxes. In essence, under this ruling, the PEO was nothing more than a conduit to pay wages and payroll taxes.

While the new IRS position provides some protection for taxpayers who want to use a PEO, the only difference, in my opinion, is that now if there is a dispute you have to deal with the IRS directly, instead of having to deal with the IRS and the PEO as to who is responsible. It does not change the fact that if the PEO does not make the payment, you will be embroiled in some sort of dispute that will be time consuming, stressful, and take away from running your business.

If you have any questions about employee leasing companies or other matters regarding your business give me a call at 248-455-6500 or email me agoldberg@ajglaw.com

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4 Elements that Make a Succession Plan Destined for Success

As you know, I’m a big advocate of succession planning, and have tweeted, posted on my social media accounts, and blogged about this topic here and here. However, I still find that well over 75% of businesses in Detroit have failed to implement a comprehensive succession plan.

That’s why I was excited to talk to Tim Gunn, CFO of the Adamo Group, regarding the succession plan at Adamo. You might recall that John Adamo, President of Adamo Group, died in a construction accident in late 2015. When talking to Tim, I asked how the business not only continued but thrived after Adamo’s sudden death. The first element he attributed the success to was the Buy/Sell Agreement that provided for the orderly transfer of shares to his partner. The next element Tim noted was that more importantly the Buy/Sell Agreement was funded with life insurance so there was adequate liquidity to payoff John’s heirs. The business did not have to pay off John’s estate with its own cash, which would have clearly put undue financial strain on the business.

For most businesses, the implementation of a Buy/Sell Agreement and having a life insurance policy to support it, would be the beginning and end of their plan.

However, I believe there are additional elements of a succession plan that have to be addressed in order to fully ensure the longevity of the company.

This led to the next part of my discussion with Tim where we discussed operational issues related to succession planning:

  • Be Proactive:  The first action Adamo took was to schedule a meeting with the bank to discuss their financial situation, how the business was going to continue, what strategies were in place, and explain why the business would continue to be a profitable and credit-worthy customer of the bank. By being pro-active, they generated a lot of goodwill with the bank.
  • Ensure Clients Have Relationships with the Right People:  Tim also discussed the company’s relationship with customers after John passed away. Tim said many of their customers had relationships with managers or other senior executives so there was not a hiccup in the relationship with the company. This point should not be overemphasized. A business cannot survive the death of its owner if all customer relationships sit solely with the owner.

    A business cannot survive the death of its owner if all customer relationships sit solely with the owner.

  • Create Relationships with Vendors: Vendor relationships were next on the list. Again, Tim said because of its long-standing relationship, vendors actually extended additional terms and consideration to Adamo. While vendors always want customers to sell to, they could have very easily cut off Adamo for fear the company would not continue.
  • Make Yourself Obsolete:  The successful transition would not have been possible had John and his brother not established and groomed key executives throughout the company. It was clear Adamo made a concerted effort to have the company thrive in the owners’ absence. As I’ve always promoted, the most valuable business is the one where the owner and boss are obsolete.

    the most valuable business is the one where the owner and boss are obsolete. 

Adamo’s experience, unfortunately, is the exception and not the rule. Too often, business owners think that simply having a Buy/Sell Agreement in place (even if it’s often not funded) means their succession plan is in place.

However, true business continuity is mostly about culture, leadership, relationships with vendors and customers, having proper internal controls and policies, and most importantly, grooming the right people to manage the business and giving them the opportunity to learn while the owner is alive to mentor them. These are the elements that truly make a succession plan destined for success.

If you have any questions about succession planning give me a call at 248-455-6500 or email me at agoldberg@ajglaw.com.

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Free Yourself from the Pointless Letter of Intent

The case of Up Hydro, LLC v. Artibee heard by the Michigan Court of Appeals is critical for all parties who want to use letters of intent as part of the purchase agreement. The plaintiff, who wanted to get out of the agreement, argued that no binding contract existed because its offer stated it was “pursuant to the terms and conditions of a separate offer agreement to be signed by us.” When the plaintiff decided he didn’t want to go through with the sale, he filed a claim to assert a claim on the property, and the defendant counterclaimed for breach of contract.
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