Your Lawyer: An Owner’s Manual, A Business Owner’s Guide to Managing Your Lawyer
by Henry C. Krasnow. Chicago, IL: Agate. 188 pp.
(Available through Amazon.com)
Here’s a book that you will want to own. The author has written a practical and useful resource book to help the reader better understand the legal process, find a good lawyer, and work with that lawyer to get “higher quality services
Several themes run through it:
- Lawyers are very literal, so ask the right questions, don’t give them mixed signals, and be realistic about your goals.
- Disagreement and litigation are only about money, not revenge; they are not the place for strong emotions but rational actions and decisions.
- Lawyers should offer practical advice and educated guesses about risks and rewards of going forward with any legal decision. They should be able to clearly and strategically tell the client the odds of wining, losing, or settling, providing as Krasnow describes it, “the ever changing calculation”.
The first five chapters discuss the nuts and bolts of ‘lawyer management’. After an introduction to the book in which the author explains that this book ‘is not meant to be a condemnation or criticism of our legal system’ but a way to get the most from your lawyers, Krasnow describes what lawyers do: 1. Structure business relationships; 2. Structure agreements and put them in writing; 3. Ask impolite questions that often need to be asked; 4. Predict the future; 5. Resolve disputes; 6. Help minimize taxes; 7. Help implement change caused by death, retirement, expansion or contraction; 8. Help avoid problems with the government; 9. Answer questions and provide a good sounding board.
Chapter three discusses how to spot a good lawyer and how to be a good client, one who is “part of the solution, not part of the problem”. Chapter four repeats one of the central themes of this book: no dispute resolution system is perfect, and that disputes “are often best resolved by determining what is best for the business, and not by the rigid application of moral principles… that means, to make wise decisions, you must understand the situation you are facing. And, finally, he asks and answers the question, “When to Settle?”
Chapter five summarizes what good lawyers do, especially during contract negotiations:
Chapter six “Ten Great ways to Get More from Your Lawyer for Less: A Review” is a summary of the previous chapters. Chapters seven and eight focus on family businesses. In chapter seven, the author concedes that “Business owners can have blind spots for many different things, but dealing with family business relationships is one of the biggest and most problematic blind spots I’ve had to deal with in my forty years of legal experience. Rational, business-like decision-making can go out the window when family conflict is involved.” He makes the case for family business advisors who have developed the skills necessary to help resolve the problems of a family that owns a business.
Krasnow then describes common issues that the family business owner faces: (1) problems with a family owner employee buying our shareholders “with no right to be bought out’, (2) the virtue of liquidity agreements; (3) shortcomings and alternatives to prenuptial agreements; (4) twelve great reasons to have an advisory board; and (5) six types of board members to avoid.
The eighth chapter on “Minority Shareholders’ Rights” begins with a caution to business owners, “Treating the minority in this way (implementing ill-advised business strategy, taking out too much money, abusing expense accounts, or paying their closer family members far more than is appropriate) is bad management that, in the long run, will lead to other difficult problems resulting from lack of trust among the owners.” The author, then, details remedies for the minority shareholders but cautions that any lawsuit that raises these issues will be expensive. The chapter ends on a more optimistic note as he asks: Can this all be avoided before a dispute over the price occurs? Of course! As long as they enter into an agreement, early in the business development, or later, as long as the parties are advised by lawyers, accountants, and other consultants who see that everyone accommodates each other owner’s power. He, then, provides a useful list of recommended considerations in any agreement.
The final chapter, Estate Planning—Some Forgotten Goals, begins with the reminder that, unfortunately, many experts (in estate planning) fail to offer any guidance on two significant issues: first, the emotional impact that the estate plan will have on the survivors and second, when a business is the principal asset of an estate, whether ownership of that business will be structured to promote that business’s continued health. As a result these plans result in the maximum saving on taxes, provide insurance for the widow, and guarantee that skilled advice will be given as to how to invest those proceeds. Yet, they can inadvertently create and foster family tensions around how the assets were distributed or lead to the demise or stagnation of the business.
The author emphasizes that you, the reader, must be the boss; you must supervise your estate planners to make sure their work accomplishes your goals, not just the ones the advisors are comfortable with. He recommends that the business owner’s efforts should be guided by “three simple insights”: 1. Don’t be afraid to talk about your plans with your children. 2. Don’t be penny wise and pound-foolish. 3. Don’t forget the principles of good management.
The Appendix, entitled “The Lawyer’s language: A Common English Guide to Basic Legal terms and Concepts”, is basically a glossary of terms listed in the following categories: Ownership and Governance, Finance, Lending, Family Business Contract, Litigation and Dispute Resolution, and Enforcement of a Judgment or Other Court Order terms.
The author has done an excellent job of putting into plain English what it is that good lawyers do and how business owners (and everyone else) can get the best from their lawyers. It is replete with sound information and homespun wisdom, enhanced by very clear explanations, case examples, and useful lists. It’s a great resource for business owners and for non-legal advisors. (The only addition I would like to see is an Index.)