JDWalls & Associates

 

Non-compete agreements have become commonplace today.  Unfortunately, the misunderstanding of them is equally common.  Employers may believe these agreements are worthless and therefore do not use them.  Others may use them, but use a form document or draft the document themselves. 

The truth is, non-compete agreements are difficult to enforce.  The courts generally do not like any restraint on trade or an individual’s ability to earn a living.  Nonetheless, a carefully drafted agreement can be a powerful tool to help employers protect their business. 

Non-compete agreements are governed by state law.  In Indiana, a valid non-compete must:

·          Be given in exchange for some benefit at the time it was signed;

·         Protect a legitimate business interest of the employer; and        

·         Must be reasonable in scope, geography and time.

The employee must receive something in exchange for their agreement.  In most cases, requiring new employees to sign the agreement as a condition of their hiring is adequate.  Also, the Indiana courts have held that keeping a current job is also adequate for enforcement.  Many states differ on this interpretation so care must be taken to understand under what jurisdictions the agreement will be used.   Due to this, many employers will give something additional to continued employment in return for the signed agreement.  The amount of this additional consideration varies depending upon the situation.

An employer’s legitimate business interests usually include items such as customer lists and confidential information.  The employer must demonstrate reasonable efforts to protect the information and that the information would give someone else an unfair advantage.

The scope, geography, and time rule is the most difficult to navigate.  The court balances the needs of the employer with the burden on the employee.  This standard will be different in each case.  If the court finds that the document was intended to restrain fair trade, they can strike down the entire document.

The result of all this is that amateur attorneys should beware!  This tool, if carefully drafted, can provide valuable protection for your business.  If drafted sloppily or incorrectly, it can also end up costing an employer dearly. 

Posted by John D. Walls at 10:31 AM | Permalink | TrackBacks (0)

I know an advisor who specializes in establishing 401k and pension plans for businesses.  We’ll call him Al.  He was talking to a friend of mine who owned a small business.  We’ll call him Bill.  Bill’s business had one full-time employee and one part-time employee, both of whom were secretarial with low to average compensation.  Al knew that Bill was just shopping around to see what his options were.  It would be a brand new plan with small contributions.  In other words, no rollover to earn a commission on and very small monthly contributions.  Al calculated the estimated commissions in his head and the amount of time required to set up the plan.  He quickly determined it was not worth his time and began the process of retreating.  Bill relayed this story to me for a reason.  His wife was the personal assistant to the founder and president of one of the most successful local businesses.  In the past two years the company had grown from less than 200 employees to over 500.  Because of this growth they had outgrown their old pension plan.  The president asked his personal assistant, Bill’s wife, to find a new pension advisor who could provide them with an updated plan.  Al missed out.  He thought he had read Bill and his situation properly, then he made a judgment call.  However, you do not know who they know.  Al did not know who Bill knew.  Al missed out on what would have likely been the largest case of his life because he did not take the time to find out who else the business owner knew.  He committed the cardinal sin of poor networking.  He tried to make a sale when he should have tried to make a relationship. 

 

Steve Lawson

Steve Lawson Consulting

317-708-3770

http://www.SteveLawsonConsulting.com

http://www.STARteamNetwork.com

 

Making Advisors More Successful

 

 

 

 

Posted by John D. Walls at 12:07 PM | Permalink | TrackBacks (0)

 

Recently, my wife and I were visiting a city in the desert located near Lake Mead – the name of the city has been withheld to protect the innocent.  I had been there before, and each time I visit I am amazed by the diversity of the human race.  I watch people from every walk of life, socio-economic class, size, shape and color.  It is amazing.  Something I noticed on this trip more than in the past, however, was the countless number of tattoos.  They were everywhere and they seemed to be on everyone.  I saw big ones, small ones, black and white and in color, I saw them on legs, arms, backs, chests, necks, and I am fairly confident that there may have been some in places not generally displayed to the masses.

Seeing them all made me wonder why so many people choose to permanently mark their bodies.  Without pretending to understand the psychology, I suspect a lot of people get tattooed as a way of leaving a permanent mark on the world.  People who see the tattoo will have a visual reminder of what the individual bearer represents.

Now, those of you who know me know that I am chronically unhip, so I was probably more shocked than I should have been.  I was just amazed by endless array of styles, colors, and depictions etched into peoples’ skin.  Don’t misunderstand me, I am not opposed to tattoos, I, by virtue of my profession, am simply a proponent of a different method for leaving your permanent mark on the world.

Taking steps to plan and protect your financial future for yourself and your loved ones is a great way to leave your mark on the world.  The positive results that come about by taking the time to sit down with an attorney to prepare your estate plan, or finding a financial planner to help manage your money, or speaking with an insurance agent about the benefits of life, health, or long term care insurance will be remembered long after the ink from a tattoo fades.  Taking these types of steps can ensure you will be remembered for who you were as a person, not for the financial mess you left your family to clean up when you passed away or became disabled.

I know: the prospect of starting to make such a plan can be frightening.  It takes time and money, and you have to open yourself up to think about possibilities you may have never even considered.  But surely steps like these are not as frightening as having someone repeatedly stab your skin with needles dipped in ink that you can’t wash away.  That seems scary.

            Matt Lewis  

           mslewis@jdwalls.com

Posted by John D. Walls at 12:48 PM | Permalink | TrackBacks (0)

When a privately owned business is a factor determining the marital estate to be divided in a divorce, the value of that business needs to be determined.  One of the more common approaches to valuing a business is an income approach.  When an income approach is used, a business’s income is adjusted or normalized to determine the true economic benefit generated by the business.  One of the more common adjustments to income relates to the owner’s compensation.  For example, if an owner takes a salary much higher than a market rate for the job he or she performs, the amount of salary in excess of the market rate is added back to the business’s income to determine its value.

In this situation, if the owner’s entire salary from the business is used as a basis to determine maintenance or child support, the amount of “excess” salary used in determining the value of the business has been effectively counted twice.  It has been counted once in the value of the business and once in the value or amount of maintenance or child support.  This double counting is often referred to as “double dipping” in divorce matters.

Paul N. Wonch, MBA, CPA/ABV, CVA

Mr. Wonch is the business valuation specialist at K. B. Parrish & Co. LLP, an Indianapolis, Indiana CPA firm.  He is an expert in the valuation of privately owned businesses and has testified as an expert in federal court.  Mr. Wonch has completed 100’s of valuations for a wide variety of businesses.  His business valuation experience includes valuations for estate and gift taxes, divorce, shareholder disputes, buy-sell, ESOP’s, etc.  He can be reached via email at pwonch@kbparrish.com.  For more information about K. B. Parrish & Co. LLP go to www.kbparrish.com.

Posted by John D. Walls at 12:03 PM | Permalink | TrackBacks (0)