It’s hard to come up with a company of any size that doesn’t need some type of legal help.
Legal pitfalls can pose risks to your business when getting started; bringing on a partner, employee, or subagents; preparing for a sale; or doing deals with a systems integrator. Understanding these risks is crucial for safeguarding your company’s future.
Navigating Complex Agreements
Sophisticated companies often use loopholes in their supplier, partner, or broker agreements. As an agent, MSP, or VAR, these loopholes could put your commissions and the ability to sell your business in jeopardy. Recognizing these challenges early can help you avoid costly mistakes and protect your business interests.
Common Legal Pitfalls
Here are some situations where partners can get burned:
- Handshake or oral agreements for partners, agents, subagents, VARs or MSPs, who end up fighting over something they never discussed and/or can’t agree on.
- Evergreen commissions offer too many opportunities for suppliers or brokers to get out of their obligations to pay.
- Being unable to freely assign your commissions in a transaction, which makes it harder to “sell off” your accounts.
- Not having written agreements and investors being unwilling to buy without written agreements.
- Referral/commission agreements that cut you off unless you do X, Y, or Z on renewals to continue getting paid.
- Going through a transaction without legal counsel and unknowingly breaching the agreement because the written agreement didn’t accurately reflect the oral negotiations.
Rich Goates
These examples highlight the potential dangers of inadequate legal protection.
The Risks of ‘Homemade’ Contracts
It usually only takes getting burned once to realize that you should not be doing your own contracts.
The agent community instinctively knows this, but many agents, MSPs, and VARs are tired of spending hours on their own dime, trying to explain their business to general commercial contracts lawyers who just don’t understand it. As a result, many partners feel left to go it alone, and just grab paragraphs they like from existing agreements they have pieced together through the years.
You don’t need to use your homemade contracts anymore. Several lawyers specialize in the legal issues associated with the channel. Find one you enjoy working with and involve them in your business.
Understanding the legal landscape and avoiding common pitfalls is essential for any business. By securing specialized legal counsel, you can protect your interests, ensure compliance, and focus on growing your business with confidence — and you’ll sleep better at night.
Rich Goates is the owner of Goates Law Group PLLC. He spent his entire career in sales or supporting sales companies’ legal needs. In December 2022, he started his own firm to better support the channel, and he now serves many agents, small suppliers, MSPs, VARs, and system integrators. Find out more about Goates’ background at channelWise.
Read more Ask the Experts columns here.
Have a question? Email our experts now!
Image: iStock
