Once upon a time, there was a girl who toiled away at her first job after graduating from law school. It was a start up. She felt lucky to be blazing her own trail. They were going to change the world; well, at least the face of the intellectual property portfolio management world. They strove to show businesses and clients that there was an alternative to Patent Trolls that actually HELPED people. Among them were MBA’s graduates, seasoned industry professionals, attorneys – the four of them had to succeed!
They met as a team and deliberated for a day about the details of their employment contracts, their articles of incorporation, and their by-laws. The girl wrote them though she had never done anything like that before (no, they don’t teach you that in law school).
Some months in: The girl and two of her colleagues toiled away at their designated responsibilities. And the CEO started to stroll in at 10am…or not come in at all. He would message people on social media instead of picking up the phone and he would miss meetings. They were not making the money that they thought they would by then.
There was an undercurrent of dissatisfaction with the way things were going. The girl and two toiling colleagues were unhappy. They told the CEO that they were no longer going to devote all of their time to the company (never a good sign).
THEN…a breath of relief…a good bit of money actually came in. Real money. That they had earned.
And then…the sh!t hit the fan. Because…what happened? Oh yeah, the CEO deducted a ton of expenses and when asked for the receipts/backup…well, there were delays and more delays and excuses. He offered them a token amount as a gesture of kindness. Um, what? This is a business! That’s not how dividends work, buddy!
There were arguments. The girl and her two colleagues quit in a dramatic fashion. They wanted what they had been sold – the CEO’s dream. They had lived up to their end of the bargain, dammit! The CEO invited a lawsuit (come at me, bro!) and also threatened one for breach of contract.
::apply brakes:: The girl had written those articles of incorporation AND their employment agreements. He couldn’t sue them! She may be fresh out of law school, but she was a lawyer, and she wasn’t going to be bullied!
She channeled her rage into an action plan on how to extricate herself and her two, toiling colleagues from a messy situation without more of a mess. It took one day. And an understanding of what was actually written in the contracts they had all signed. Did they lose the money that they were owed?
Yes. They did.
So, why is it still a win? Because her colleagues had families. And houses. And they all had lives that they wanted to live. And other jobs that they wanted to pursue. Any lawsuit would have cost tens of thousands of dollars (at least) and would have taken time away from all of the other important things in their lives.
Was there a better way to handle this? Maybe. But it was a great learning experience on why it’s important to have an Operating Agreement, contracts, and all of that legal stuff that just slows everything down and costs money (real life excuse heard by yours truly).