Arbitration and mediation are two different forms of alternative dispute resolution, or ADR, that parties may elect to use, or which may be contractually mandated, to resolve a business dispute without resorting to filing a law suit in court.  Arbitration and mediation are entirely different processes than one another.

Arbitration involves the appointment of one or more arbitrators to hear and consider evidence and actually make a decision in the dispute facing the parties.  The arbitrator occupies the role that the judge would occupy in a court of law.  Often, arbitration is contractually mandated as the exclusive dispute resolution process that business parties may utilize.  Contractual arbitration provisions may go so far as to require that the arbitration be conducted within a fixed time-frame; that a certain arbitration provider be used (e.g. the American Arbitration Association or other service); and may limit discovery, the number of witnesses presented at the arbitration proceedings, and other practical issues.   In such circumstances, contractual arbitration provisions often call for binding arbitration – that is a proceeding that affords no right of appeal following the arbitrator’s rulings on the issues of the case.

By contrast, mediation is a facilitative system where the parties agree to the appointment of a neutral mediator to try to assist them in reaching a negotiated resolution to the dispute they face at the time.  Unlike the arbitrator, the mediator has no decision making authority over the issues in the dispute.  Rather, the mediator’s role is to facilitate communication between the parties to allow them to come up with their own resolution to the pending dispute.  While mediators are typically skilled in presenting alternatives that the parties may not have previously considered, it is ultimately the parties themselves who make the decision whether to resolve the dispute and who shape and agree to the resolutions terms.

Partner Aaron Lovaas of Global Business Lawyers serves as a private mediator and arbitrator for clients on a regional, national and international basis, also serving the local legal community in Nevada as a court-appointed arbitrator in Nevada’s court annexed arbitration program.

Many closely held corporations and other entities utilize shareholder or membership agreements to govern the relationship among its shareholders and to address contingencies that might arise in the future.  Once a shareholder agreement is drafted and executed, however, it is unwise to simply put it on a shelf and think that it is forever sufficient.  Just with other aspects of the business, Global Business Lawyers recommends that shareholders’ agreements be reviewed annually to ensure that the contingencies that are real possibilities in the future of the business are adequately addressed and continue to be as the business evolves.  For example, there are a number of business valuation methods that could be employed to value the shares of a departing or retiring shareholder.  Just because the shareholders agreed on a particular valuation method when the agreement was initially drafted doesn’t mean that they must stick with that method forever.  If a different valuation method better fits the evolving needs of the business and individual shareholders, a revision to the shareholders’ agreement is probably in order.  The investment of time and fees into a visit with your business lawyer to periodically review and maintain your shareholders’ agreement and other business agreements helps to prevent significantly greater expenditures and potential damage to your business if litigating over an outdated and somewhat inapplicable shareholders’ agreement in the future.

Happy New Year from Global Business Lawyers.  The New Year is a great time for a visit with your business lawyer and a business check-up.  We frequently encounter business owners who have overlooked the payment of their annual filing fees to the Nevada Secretary of State, resulting in their corporation or LLC falling into a “default” status.  The primary reason for forming a corporation, LLC or other like entity is to limit, to the greatest extent possible, the personal liability of the business’ principals for the errors or omissions of the entity.  Failure to maintain the entity’s good standing with the Secretary of State is a common mistake that jeopardizes the protection of the individual business owners that entity formation is designed to provide.  Likewise, many business owners overlook routine record keeping in the nature of corporate minutes and resolutions, or keeping stock registers and other records of ownership up to date.  While the record keeping can be brought current annually, or periodically throughout the year, a consistent failure to maintain and update such records can also endanger the protections afforded by forming the entity in the first place.  Your business lawyer is the appropriate person to review the status of your corporate filings and record keeping to ensure that your business is positioned to take advantage of the protections that Nevada law allows.

The New Year is also a great time to examine whether your business has evolved to the point where a different business form may be more advantageous or whether it is time to retain your business lawyer as your company’s resident agent (which we always recommend) rather than a commercial resident agent service.

There are many “to-do’s” in the New Year.  Adding a business check-up to the list is likely to save time and expense for your business as the year wears on.

In the Nevada court system, cases involving amounts in controversy of less than $50,000.00 (subject to certain exemptions) are assigned to the court annexed mandatory arbitration program.  The goal of this program is to resolve lesser value cases on an expedited basis, with limited discovery, thereby freeing up valuable court resources for application to higher value cases.  The case is assigned to a third party arbitrator, who is charged under the Nevada Arbitration Rules, with rendering a decision on the merits of the case within six months (up to twelve in extraordinary circumstances).

Partner Aaron Lovaas serves as an Arbitrator within Nevada’s Court Annexed Arbitration Program and Global Business Lawyers has represented scores of clients within arbitration proceedings in Nevada.

The answer is yes, if you can prove what the terms were to be.  Often, however, the parties to an oral contract have widely divergent views on what those terms were.  Today, for example, we settled a case involving a verbal agreement to establish a joint venture to form and operate a new company.  The parties to the case, and to the agreement, all invested substantial sums of money and the fledgling business incurred substantial sums of debt to get off the ground.  One of the parties ceased making capital contributions to the new business after investing hundreds of thousands of dollars because in his view he had contributed all that was required under the agreement.  The other party had quite a different understanding of the “agreement” and expected the other to fund the new business indefinitely.  After spending tens of thousand of dollars in attorneys fees and other expenses, including international travel for one of the parties, the settlement that was reached was for each party to simply walk away from the litigation chalking up their respective losses to a bad business decision.  Neither party could risk continuing to fund the litigation in light of the uncertainty of the terms of the oral agreement.  Had the agreement between them been reduced to writing, one party or the other could have been more confident in the terms and the remedies available.

Are verbal contracts enforceable?  Yes – but, they’re also worth the paper they’re written on.

IMPORTANCE OF ENTITY PROTECTION – LIMITED PERSONAL LIABILITY
TYPES OF PROTECTION AND THE IMPORTANCE OF YOUR NEVADA BUSINESS LAWYER

Limited Liability Companies (LLC)

A limited liability company (LLC) is a legal form of business entity that provides limited liability to its owners. It is a combination business entity maintaining certain characteristics of both corporations and partnerships. However, it is often more flexible than a corporation and is an excellent tool for companies with a single owner.

Members of an LLC are the owners of the LLC in the same vein as shareholders are owners of a corporation or partners of a partnership. These owners hold membership interests in the LLC entitling them to a right to receive distributions of capital from the LLC and retain proportionate rights over the LLC based on their membership interests. Prior to making any decision regarding the formation of an LLC we highly recommend that you contact a Nevada business lawyer to ensure that your rights are protected and that the entity you choose best suits your business goals.

TYPES OF PROTECTION AND THE IMPORTANCE OF YOUR NEVADA BUSINESS LAWYER

 Corporations (continued)

 Yet another advantage to the corporate structure is that the corporation can exist perpetually. This allows for stability and accumulation of capital creating investment in projects of larger sizes and accumulation of corporate assets of greater value, leading to greater value for shareholders. This perpetual lifetime feature indicates the boundless potential duration of a corporation’s existence, and its coterminous accumulation of wealth. Prior to making any decision to incorporate in Nevada we highly recommend that you contact a Nevada business lawyer to ensure that your rights are protected and that the entity you choose best suits your business goals.

TYPES OF PROTECTION AND THE IMPORTANCE OF YOUR NEVADA BUSINESS LAWYER

Corporations (continued)

In order to incorporate in Nevada a firm, or its shareholders must submit its articles of incorporation with the Secretary of State. The articles of incorporation establish the general nature of the corporation, the amount of stock it is authorized to issue, and the names and addresses of its directors.  Nevada does not require the identity of the corporation’s shareholders to be publicly disclosed.

Most corporations are registered as either a stock or non-stock corporation. Stock corporations sell stock to generate capital and are usually for-profit. Non-stock corporations do not have stockholders, but may have members with voting rights in the corporation. In addition, corporations can take the form of for-profit or non-profit, publicly traded, privately held, closely held, or closed altogether. The wide variety of ways and the ease with which a corporation can be formed in Nevada is one of the many reasons for Nevada’s popularity as a corporate domicile. Prior to making any decision regarding incorporation we highly recommend that you contact a Nevada business lawyer to ensure that your rights are protected and that the entity you choose best suits your business goals.

TYPES OF PROTECTION AND THE IMPORTANCE OF YOUR NEVADA BUSINESS LAWYER

Corporations

A corporation is a legal entity separate from the individuals that form it. The defining feature of a corporation is its legal independence from the people who create it. If a corporation fails, or dissolves, shareholders (in general) only lose their investment, and employees their jobs, but neither will be further liable for the debts owing to a corporation’s creditors, unless they made an agreement to be personally liable.

Corporations require a special legal framework that grants a given corporation legal personality. As such, corporations have the ability to sign binding contracts, pay taxes in a capacity separate from shareholders, and own property. In addition, a corporation’s legal personality grants creditors priority over corporate assets upon liquidation (or insolvency) and corporate assets cannot be withdrawn by shareholders, nor can assets of the firm be removed by creditors of a shareholder. Prior to making any decision regarding incorporation we highly recommend that you contact a Nevada business lawyer to ensure that your rights are protected and that the entity you choose best suits your business goals.

WHY IS IT IMPORTANT TO LIMIT PERSONAL LIABILITY?

By reducing the risk of personal liability in running the business, a business owner is able to focus on business operations, competition and profit, rather than the risk of personal ruin through some unfortunate event. Forming a valid Nevada business entity provides that comfort.  In addition, entity protection comes in varied forms, each with the ability to lend itself to the specific needs of the business. This flexibility allows businesses to grow and become more competitive in an increasingly global market. There are also significant tax advantages to entity protection.

Although upcoming discussions may suggest that entity formation is relatively simple, it would be a mistake to form an entity without first consulting your Nevada business attorney because selecting the right entity that provides your business with the most liability and asset protection can be complex.