Nonprofit Year-End Governance: A Simple Guide to Staying Compliant Going into 2026

What Business Owners and Nonprofits Need to Know Artificial intelligence is everywhere right now. You can ask a chatbot to draft a contract, write a policy, or explain “what happens if my business partner leaves” all in seconds and usually for free. For busy business owners and nonprofit leaders, that’s tempting.If AI can write the document… do you still need a lawyer? Short answer: AI is a powerful tool, but it is not a substitute for legal judgment, strategy, or accountability. Used the wrong way, it can quietly create expensive problems for “future you” – the you who’s dealing with a lawsuit, a breakup between partners, a denied insurance claim, or an investigation by a regulator. How People Are Using AI Instead of Lawyers Most business and nonprofit leaders are using AI in a few core ways: • DIY contracts and policies • Asking AI to draft operating agreements, partnership agreements, client contracts, NDAs, terms of service, and privacy policies. • Dropping in a few facts about the business and asking for “a solid contract that protects us” without understanding which terms really matter, or how New York law treats them. • HR and employment documents • Generating offer letters, independent contractor agreements, non-competes/non-solicits, and employee handbooks “for New York” based on a short prompt. • Relying on AI to explain who can be treated as a contractor vs. employee, and what’s “standard” without understanding New York-specific wage and hour rules. • Governance, compliance, and disputes • Creating corporate bylaws, board resolutions, and nonprofit policies from templates generated by AI. • Having AI draft demand letters, cease-and-desist letters, or responses to disputes, then sending them out without legal review. It can all look very polished. The danger is that it may not be legally accurate, enforceable, or appropriate for your situation. The Risks of Letting AI “Be Your Lawyer” 1. No attorney–client relationship, no accountability AI is not a law firm. It doesn’t: • Owe you a duty of loyalty or confidentiality in the way a lawyer does • Assume responsibility for advising you under New York law • Carry malpractice insurance if things go wrong If a contract AI wrote for you leaves a massive loophole, misstates New York law, or fails in court, there’s no one on the hook for that but you. A real lawyer: • Owes you specific ethical duties • Is licensed, regulated, and subject to discipline • Has malpractice coverage and professional obligations to give competent advice AI has none of that. 2. “Looks right” ≠ legally right (especially under New York law) AI is excellent at producing language that sounds like a contract or policy. That doesn’t mean: • It reflects current New York law • It’s tailored for LLCs vs corporations vs nonprofits • It’s enforceable in the way you think Common issues that show up in AI-generated documents: • Wrong jurisdiction. Provisions that might work in Delaware or California but not in New York. • Old or generic rules. Using concepts that were true under prior law or in another state. • Missing mandatory language. For example, certain New York-specific disclosures, notices, or procedural details. • Contradictions within the document. One section quietly undermines what another section is trying to do. AI doesn’t sit down and ask you: • “How are the owners actually contributing capital?” • “What happens if one of you dies, becomes disabled, or simply disappears?” • “Are you subject to New York’s specific nonprofit or employment laws?” It just writes what sounds plausible. 3. AI is only as good as the input – and non-lawyers don’t know what to tell it This is one of the biggest hidden risks. Non-lawyers usually don’t know which facts are legally important. When you ask AI for help, you decide what to include: • You might mention the basic deal terms but leave out details that completely change the analysis (e.g., how people are paid, who controls the bank account, who owns IP, whether someone is licensed). • You might forget about related documents (old operating agreements, side letters, prior board decisions) that need to be considered. • You might not realize that a “small detail” triggers an entirely different set of New York rules. AI can’t fix what it doesn’t see. It: • Can’t issue-spot like a trained lawyer • Can’t press you with follow-up questions the way a good attorney will • Will confidently generate language based on an incomplete or misleading description So you end up with a very professional-looking answer to the wrong question or to an incomplete version of the real question. 4. No strategy, only text Law isn’t just words on paper. It’s: • Strategy • Leverage • Trade-offs • Human behavior AI can draft a clause, but it cannot: • Evaluate how a clause will play out when your business partner gets angry, or when your board is divided • Tell you when a “perfectly drafted” term is a terrible idea for your relationships or reputation • Help you decide whether to push on a point in negotiation or let it go Examples: • Partner buyout:AI can describe how a buy-sell clause works.A lawyer can analyze your cap table, your personalities, your exit plans, and help design something that won’t blow up on you later. • Nonprofit conflict-of-interest policy:AI can generate a policy.A lawyer can explain how the policy interacts with New York’s Not-for-Profit Corporation Law, your AG filings, and your specific board dynamics. • Employment issues:AI can draft an independent contractor agreement.A lawyer can walk you through misclassification risk, payroll tax exposure, and whether your “contractor” is really an employee. 5. Confidentiality and data risk When you paste sensitive information into an AI system, you should assume: • That information may be stored by a third party • You may not fully control where it lives or who has technical access For businesses and nonprofits, that can create: • Confidentiality issues with client/customer data • Potential privacy obligations (e.g., if you’re dealing with certain regulated information) • Reputational risk if details leak or systems are compromised A lawyer: • Is bound by strict confidentiality rules • Can help you decide what information should and shouldn’t be shared through any tool • Can draft appropriate data-processing and confidentiality agreements with vendors 6. Contracts that “work on paper” but fail in real life AI often produces contracts that are internally inconsistent or practically unworkable. Common patterns: • No clear remedies. The contract says what people “must” do, but not what happens if they don’t. • Impossible procedures. Deadlines or approval processes that no one will follow in real life. • Unintended personal liability. Owners accidentally signing in their individual capacity instead of on behalf of the entity. • Mismatched expectations. The language doesn’t reflect the actual business deal, which becomes a problem if there’s a dispute. A real lawyer: • Starts with the actual business terms and risk tolerance • Makes sure the contract reflects what you think you agreed to • Spots gaps between your operations and what the document assumes 7. Regulatory and nonprofit-specific traps This is where “generic AI output” is especially dangerous. Some examples: • Charitable solicitation and fundraising:A nonprofit relying on AI to “tell us how to fundraise nationwide” could easily miss state registration requirements and Attorney General rules. • Automatic renewals and subscriptions:New York and other states have specific laws about automatic renewal notices, cancellation, and disclosures. AI may or may not catch them. • Professional or licensed businesses:For accountants, therapists, doctors, architects, and other licensed professionals, entity structure and ownership restrictions are not optional. • Employment and wage/hour rules:“General US law” guidance on breaks, overtime, and classification can be very wrong for New York. A lawyer can’t promise zero risk, but can at least help you understand the landscape and make informed decisions. When Does It Make Sense to Bring in a Lawyer? You don’t need a lawyer for every single document or decision. But you should think very carefully before relying on AI alone for: • Anything involving ownership or control • Operating agreements, shareholder agreements, partnership agreements • Buy–sell provisions, exit terms, or valuation mechanisms • Employment and contractor issues • Hiring/firing, noncompetes/non-solicits, independent contractor relationships • Major contracts and revenue streams • Your main client/service contracts, MSAs/SOWs, key vendor agreements • Nonprofit governance and fundraising • Bylaws, conflict policies, AG filings, real estate transactions, mergers, dissolutions • High-stakes disputes • Threatened lawsuits, demand letters, or settlement negotiations These are the areas where a mistake now can become a six-figure problem later. The Bottom Line AI is here to stay, and it can absolutely make legal work more efficient in the background. But: • AI does not replace legal judgment, strategy, or accountability • “Looks professional” is not the same as “protects you under New York law” • The more complex, high-stakes, or relationship-heavy the issue, the more you need a real lawyer involved If you’re: • Relying heavily on AI for contracts or policies • Thinking about a major deal or restructuring • Worried your documents might not match how you actually operate …it’s a good time for a legal check-up. If you’d like to talk about where AI might be “good enough” and where you really need a human lawyer in the loop, you can contact my office to schedule a consultation. (This article is for general informational purposes only and is not legal advice. Reading it does not create an attorney–client relationship. For advice about your specific situation, please consult a lawyer licensed in your jurisdiction.) 

Nonprofit leaders are busy. When the board agrees on something in a meeting, it’s tempting to treat that as “good enou gh” and move on. But from a legal and practical standpoint, it’s not enough that the board talked about a decision or even agreed informally. For many key actions, your nonprofit needs a clear, written record, usually in the form of a board resolution documented in your minutes or by a written consent. Think of resolutions as the “receipts” that show your board is doing its job. Below are ten decisions that should always be backed by a formal board resolution (or clearly documented in your meeting minutes). What Is a Board Resolution, Really? A board resolution is simply a formal decision of the board, written down and adopted at a meeting or by unanimous written consent. It answers three basic questions: • What is the board approving? • Who is authorized to carry it out? • When/under what terms does it happen? Resolutions don’t need to be complicated. But they should be: • Clear • Specific • Kept with your corporate records (minutes, bylaws, key policies, etc.) 1. Adopting or Amending Bylaws Why it matters:Your bylaws are the “rulebook” for how your nonprofit operates. Changing them without a clear record creates confusion about which version is in effect. Without a resolution, you risk: • Disputes about who has authority to act • Challenges from regulators or funders about whether actions were valid • Difficulty showing good governance if there’s ever an investigation or dispute 2. Electing or Removing Directors Why it matters:Your board is the legal decision-maker for the nonprofit. You need a clean record of who is actually on the board and when that changed. Without a resolution, you risk: • Questions about whether votes were valid • Former directors still “on paper” with banks or regulators • Disputes if someone claims they weren’t properly removed 3. Hiring or Firing the Executive Director (and Other Key Officers) Why it matters:The board’s most important job is selecting, supporting, and (if necessary) replacing the executive director. This should never be done casually. Without a resolution, you risk: • Confusion over who is authorized to run the organization • Employment disputes with no clear record of the board’s decision • Problems with banks, funders, and partners who rely on your records 4. Approving the Annual Budget Why it matters:Approving a budget is not just a “finance committee thing.” It’s a core board responsibility that shows oversight of how the nonprofit uses its resources. Without a resolution, you risk: • Blurred accountability for overspending or poor financial decisions • Difficulty showing funders your board actively oversees finances • Red flags for auditors, regulators, or major donors 5. Opening or Closing Bank Accounts / Changing Signers Why it matters:Banks typically require formal authorization. Internally, you need a clear record of: • Where your money is held • Who can sign checks or access funds • When those authorizations changed Without a resolution, you risk: • Former staff or board members still having access • Banks refusing to act because documentation is missing • Internal confusion or even opportunities for misuse of funds 6. Entering into Major Contracts or Leases Why it matters:If your nonprofit is signing: • A multi-year lease • A major vendor contract • A long-term service agreement …that’s a board-level decision, not something to be left to a quick email chain. Without a resolution, you risk: • Disputes about whether the person who signed was authorized • Board members claiming they never approved the commitment • Difficulty walking away from a bad contract 7. Buying, Selling, or Leasing Real Estate Why it matters:Real estate transactions are high-stakes: long-term leases, purchases, or sales of property. These often trigger additional legal requirements, lender consents, and sometimes approvals from regulators or courts, depending on the situation. Without a resolution, you risk: • Challenges to the validity of the transaction • Delays or issues with title companies, lenders, or regulators • Internal disputes over whether the board approved the deal 8. Taking Out Loans or Lines of Credit Why it matters:Debt can significantly impact your nonprofit’s finances and future flexibility. The board should clearly approve: • The fact that the organization is borrowing • Key terms (amount, lender, interest rate, general repayment terms) • Who is authorized to sign the loan documents Without a resolution, you risk: • Board members claiming they never agreed to the debt • Lenders refusing to proceed or later questioning authority • Governance concerns if cash flow becomes tight and tough decisions are needed 9. Approving Related-Party Transactions / Conflicts of Interest Why it matters:If a board member, officer, or someone closely connected to them has a financial interest in a transaction with the nonprofit (e.g., their company is providing services), you’re in conflict-of-interest territory. These situations aren’t automatically prohibited — but they must be handled carefully: • Full disclosure of the conflict • Recusal of the conflicted person from voting • Documentation that the board determined the arrangement is fair and in the nonprofit’s best interests Without a resolution, you risk: • Serious questions from the Attorney General, donors, or auditors • Potential challenges to the validity of the transaction • Damage to your credibility and public trust 10. Changing the Mission, Programs, or Strategic Direction Why it matters:Major changes in mission or core programs are not just program decisions — they’re governance decisions with legal and practical consequences: • Your IRS and state filings are based on your stated purposes • Funders may have given money for specific purposes • Stakeholders (staff, volunteers, community) rely on a certain mission Without a resolution, you risk: • Misalignment between what you say you do and what you actually do • Potential compliance questions if you drift too far from your stated purposes • Confusion inside the organization about priorities and decision-making How to Put This into Practice A few simple habits go a long way: • Use a standard template for resolutions to keep things consistent. • Build resolutions into your agendas for big decisions. • Keep a “Resolutions” folder with your minutes and corporate records. • Train your board leadership and ED on when a resolution is needed. Need Help Getting Your Board Resolutions in Order? If you’re reading this and thinking, “We’ve made half these decisions without a single formal resolution,” you’re not alone — and it’s fixable. A nonprofit-focused attorney can help you: • Review your past decisions and clean up the paper trail • Develop simple resolution templates your board can actually use • Align your bylaws, policies, and board practices with legal requirements If you’d like a quick audit of your governance practices or help building a practical resolution process for your board, this is exactly the kind of thing we help nonprofits with. 

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By: Ameera Khurshid When New York business partners split, what happens to the company’s assets? Here’s how ownership, property, and goodwill are handled under New York law during a business breakup. Introduction When business partners decide to part ways, the emotional and financial stakes can be just as high as in a marital divorce. In New York, these “business divorces” often come down to one critical question: what happens to the company’s assets? Whether you are splitting from a co-owner in an LLC or corporation, understanding how the law treats company property, cash, and goodwill can help you protect your interests and make informed decisions about the future. • The Company Owns the Assets A common misconception among business owners is that each partner personally “owns” a share of the company’s property. Under New York law, that is not the case. Once a business is formed as an LLC or corporation, the entity itself owns its assets. The office furniture, bank accounts, intellectual property, and even the company’s name legally belong to the business and not to the individual owners. When partners go their separate ways, they are not dividing up the physical assets; they are dividing ownership interests in the company. In practice, this usually means one partner buys out the others’ interests, or the business is sold or dissolved, and the proceeds are distributed according to the ownership percentages. • The Operating or Shareholders’ Agreement Controls The first step is to look at your Operating Agreement (for LLCs) or Shareholders’ Agreement or Bylaws (for corporations). These documents often dictate what happens when an owner wants to leave, dies, or becomes unable to continue in the business. Well-drafted agreements include buy-sell provisions, tie-breaking procedures, valuation methods, and rules for handling company property. For example, the agreement might specify whether remaining owners can buy out the departing partner’s interest and how to calculate a fair price. If there’s no written agreement, then New York’s default rules will apply, for LLCs, these are found in the Limited Liability Company Law, and for corporations, in the Business Corporation Law (BCL). In either case, the absence of a clear agreement can lead to uncertainty, disputes, or even judicial dissolution, also known as court-ordered winding up of the business. • If the Business Continues: Buyouts Instead of Breakups In many cases, the business continues to operate after one partner leaves. Instead of dividing assets, the departing member’s ownership interest is bought out, either by the company or the remaining owners, depending on what the operating agreement states or what the owners agree upon. The value of that ownership interest depends on a business valuation, which may be determined by: • An independent appraiser, • A pre-agreed formula in the operating agreement, or • Negotiation between the parties. This approach avoids liquidation and preserves business continuity, especially when the company has significant goodwill, client relationships, or intellectual property that could be lost in a full dissolution. • If the Business Dissolves: Selling and Distributing Assets If the owners cannot agree on how to proceed, one may seek judicial dissolution under LLC Law §702. In that scenario, the court can order the business to wind up its affairs. When a court orders dissolution, it oversees an orderly process to make sure all obligations are met before owners receive anything. The court typically appoints a receiver or liquidating partner to sell company property, settle debts, and collect any money owed to the business. Once liabilities are paid, the remaining funds are divided among the owners according to their ownership interests or as stated in the operating or shareholder agreement. If the agreement doesn’t specify distribution terms, the court follows New York’s default rules under the Limited Liability Company Law for LLCs or Business Corporation Law for corporations, ensuring a fair and proportionate allocation of what remains. This can be a fair but inefficient outcome, especially when valuable assets like trademarks, client goodwill, or ongoing contracts are forced to be sold. • Handling Intangible Assets: Goodwill, Clients, and IP In modern businesses, the most valuable assets are often intangible. New York law treats goodwill, which is the reputation, client loyalty, and brand recognition of a business, as a distributable asset, but distinguishing it can be tricky. In professional practices (like law, healthcare, or consulting), courts differentiate between enterprise goodwill (value attached to the business itself) and personal goodwill (value attached to an individual’s reputation). Only the former belongs to the company. Other intangible assets, such as trademarks, websites, and proprietary materials, are typically owned by the business entity and can be sold, transferred, or retained by agreement during the split. If the owners cannot agree on how to divide these assets, the court will usually step in. It may appoint an appraiser to determine their market value and order the assets to be sold, with the proceeds distributed based on ownership percentages. In some cases, one owner may be permitted to keep certain assets, if they buy out the others’ interests. Without a clear plan, these disputes can become costly and delay the resolution of the business breakup. • How to Avoid Asset Confusion in the Future The best way to avoid a messy division later is to plan ahead. Before problems arise: • Keep a clear record of who contributed what to the business. • Separate personal and company property. • Establish buy-sell and valuation procedures in your operating or shareholder agreement. Consult a lawyer for this. • Decide how intellectual property and client relationships will be handled if someone exits. A few proactive steps at the start of the partnership can prevent years of stress and costly litigation later. Conclusion A business breakup does not have to destroy what you have built. In New York, company assets do not simply get divided up like personal property. They are managed and distributed according to law, contracts, and fairness principles. If you are navigating a potential business divorce or ownership dispute in New York, The Herd Law Office can help you understand your options, protect company assets, and move forward with clarity and confidence. 

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The FTC’s Noncompete Ban Is Dead. What Smart NY Employers Should Do Now Bottom line: The nationwide FTC ban on employee noncompete agreements is off the table. A Texas federal judge vacated the rule in August 2024, and on September 5, 2025 the FTC formally dropped its appeals and agreed to the vacatur. The Rule will not take effect. That doesn’t mean “anything goes.” Expect continued case-by-case enforcement against overreaching restrictions, plus active state law (including possible new NY legislation). Now is the time to tune your agreements and practices—not to shelve them. What changed • The 2024 FTC Rule is vacated nationwide. The Northern District of Texas held the FTC lacked authority for such a sweeping rule and that the rule was arbitrary and capricious. The court’s order set the Rule aside; it never took effect. • The FTC ended its appeals. On Sept. 5, 2025, the FTC moved to dismiss its Fifth and Eleventh Circuit appeals and acceded to vacatur. • But enforcement isn’t gone. The FTC and DOJ can still challenge non-competes and look-alikes when they harm competition. Agencies have said they’ll continue policing abusive restraints even without a blanket rule. Where New York stands • No statewide ban—yet. Governor Hochul vetoed a broad ban in 2023 and has favored a narrower approach. New bills introduced in 2025 would restrict many noncompetes (especially for lower-wage workers) but have not been passed as of the date this article is published. However, there may be developments in 2026 or later. • Current NY test = reasonableness. New York courts enforce noncompetes only if (1) necessary to protect legitimate interests (trade secrets, client relationships, unique services), (2) reasonable in scope/duration/geography, and (3) not harmful to the public. Practical playbook for NY employers and nonprofits 1) Use noncompetes sparingly and narrowly • Reserve for senior, truly key roles or in sale-of-business deals; keep durations short (often 6–12 months). • Tie the clause to real protectable interests (document the “why”). • Avoid blanket “industry-wide” or “nationwide” bans unless facts justify it. 2) Prefer safer alternatives • NDA/Confidentiality: Comprehensive but tailored definition of confidential info; clear carve-outs; robust return-of-materials and device/drive access cooperation. • Non-solicitation (customers/employees): Narrowly define “customer” (e.g., those with whom the employee had material contact in past 12–18 months). • Non-interference/Non-raiding: Calibrate to real risks in your industry. • IP/Work-made-for-hire + invention assignment: Especially for creative/technical roles. • Reasonable “Garden Leave” (paid notice periods) for a handful of truly sensitive positions. Why: Courts are more receptive to targeted restraints; agencies are less likely to view them as anticompetitive than broad noncompetes. 3) Align agreements with how you actually operate • Role-based scoping: Map each restriction to job duties and access rights. • Access minimization: Use IT permissions so fewer employees need sweeping restrictions. • Compensation alignment: Consider bonuses/RSUs with forfeiture-for-competition that are lawful in NY (careful drafting required). 4) Update your onboarding/offboarding • Onboarding: Signed agreements before start date; device and account policy acknowledgments; data classification training. • Offboarding: Exit interview script; reminders of continuing obligations; certificate of compliance (return/deletion). • For nonprofits: Ensure restrictions align with mission, do not chill whistleblowing, and don’t create private-benefit optics. Red-flags that trigger enforcement or lawsuits • Noncompetes for low-wage or non-sensitive roles • “No future employment in our industry” language. • One-size-fits-all templates used across unrelated roles. • Retaliation or threats to enforce plainly unenforceable clauses Action checklist • Inventory your current contracts by role; flag any noncompetes used below director level. • Replace many noncompetes with NDA + non-solicit tailored to recent customer contacts. • Tighten definitions (confidential info, “compete,” “customer”), duration (≤12 months), and territory (facts-based). • Train managers not to threaten enforcement casually; route disputes through counsel. • Plan for NY changes: Keep a “patch file” ready if Albany moves a new bill in 2026. FAQs Can we keep our existing noncompetes?Yes—subject to NY reasonableness limits and antitrust risk. Consider narrowing at renewal and pairing with stronger NDA/non-solicit. Will the FTC come after us now?Not for violating the vacated rule. But the FTC can still pursue unfair methods of competition on a case-by-case basis (e.g., collusive or coercive restraints). What about future NY law?A broad ban failed in 2023; targeted bills resurfaced in 2025 and may return. Build portable agreements that will age well under likely NY reforms. Attorney Advertising; Not Legal Advice This overview is general information based on developments through Sept. 24, 2025. Outcomes vary by facts, industry, and employee level. For client-specific drafting or enforcement strategy, please contact our office. 

Starting a business with a partner often feels like a marriage: you share ideas, resources, and dreams for the future. But just like in personal relationships, sometimes things don’t work out as planned. When it’s time to part ways, handling the separation with clarity and care can protect your business, your finances, and your peace of mind. Here’s how to break up with your business partner legally and (hopefully) peacefully. Step 1: Review Your Governing Documents The first place to look is your operating agreement (for LLCs), shareholders’ agreement (for corporations), or partnership agreement (for general/limited partnerships). These agreements often outline: • How ownership interests can be bought out • Valuation methods (appraisals, formulas, or negotiated price) • Voting rights for approving a separation • Procedures for dissolving the business if buyout isn’t possible If you don’t have these documents in place, state law (in New York, that means the LLC Law, Partnership Law, or Business Corporation Law) will fill in the gaps, but that usually leaves less control in your hands. Step 2: Get a Clear Picture of the Business Before negotiations begin, you’ll need to know the numbers: • Current financial statements • Outstanding debts and obligations • Contracts with employees, vendors, and customers • Intellectual property or licenses held by the business This information helps both partners understand what’s really at stake and can reduce suspicion or accusations later. Step 3: Explore Options for Moving Forward There are several ways to separate: • Buyout – One partner purchases the other’s ownership interest. • Third-Party Sale – The business (or its assets) is sold, and proceeds are split. • Dissolution – The company winds down, pays debts, and distributes what’s left. • Restructuring – Sometimes, adjusting roles or percentages solves the conflict without a full exit. Each option has tax, liability, and operational consequences, so it’s important to evaluate carefully. Step 4: Put the Agreement in Writing Handshake deals may feel faster, but they’re risky. A formal separation agreement should cover: • Purchase price and payment terms • Release of claims between partners • Handling of ongoing liabilities (e.g., leases, loans) • Non-compete or non-solicitation provisions, if appropriate This written agreement ensures clarity and reduces the chance of future disputes. Step 5: File the Right Paperwork Breaking up isn’t just between you and your partner—the government needs to know too. Depending on the path chosen, this may include: • Amending the business’s operating agreement or corporate records • Filing dissolution papers with the New York Department of State • Notifying the IRS and NY Department of Taxation and Finance • Updating bank accounts, licenses, and permits Skipping these steps can leave you personally liable for taxes or debts. Step 6: Keep It Professional Even when emotions run high, maintaining professionalism is crucial. Consider: • Using a neutral mediator to help resolve disputes • Communicating clearly with employees, clients, and vendors • Focusing on business goals instead of personal grievances The goal is not just to end the partnership, but to protect your reputation and future opportunities. Final Thoughts Ending a business partnership doesn’t have to mean burning bridges. With the right legal steps and a focus on fairness, you can move on cleanly and set yourself up for success in your next venture. If you’re considering a separation, working with an attorney can ensure the process is handled properly, with minimal disruption and maximum protection. Disclaimer: This article is for informational purposes only and does not constitute legal advice. For advice tailored to your specific situation, consult with an attorney. Back to News "

When it comes to running a business, contracts are the backbone of protecting your interests. Most business owners know to include the basics: price, services, deadlines, but it’s the missing details that often cause the biggest headaches later. Here are five essential clauses that belong in almost every business contract, yet are too often left out. 1. Dispute Resolution Clause Without clear rules, disagreements can spiral into costly lawsuits. A dispute resolution clause sets the ground rules: • Will disputes go to mediation first? • Will arbitration replace litigation? • Where will disputes be resolved? A well-written clause can save you from spending months (and thousands of dollars) in court. 2. Payment Terms It’s not enough to say how much is owed—you also need to define when and how it gets paid. Clear payment terms protect your cash flow and reduce the risk of disputes. They can cover: • Due dates (e.g., Net 30, Net 60) • Late fees or interest for overdue invoices • Whether payment is by check, credit card, ACH, or another method • Upfront deposits or milestone payments When payment terms are vague, you’re left chasing money. When they’re clear, you’re more likely to get paid on time. 3. Termination Clause Many contracts explain how they begin, but not how they end. A termination clause answers: • Can either party walk away early? • Is notice required (30 days, 60 days, more)? • Are there penalties or obligations that survive termination? This prevents situations where one side feels “stuck” or blindsided. 4. Intellectual Property Clause In today’s business world, ownership of ideas, content, and creations can be just as important as physical goods. An intellectual property (IP) clause clarifies: • Who owns the work product created under the contract • Whether usage rights are limited or broad • What happens if either party wants to reuse or license the work This is especially critical in industries like design, software, consulting, and marketing where disputes over “who owns what” can derail relationships. 5. Indemnification Clause This is a fancy legal term for “who pays if something goes wrong.” If your partner’s mistake leads to a lawsuit, do you want to be on the hook? Indemnification clauses shift responsibility to the party who caused the problem, protecting your business from unnecessary liability. Final Thoughts Contracts aren’t just paperwork—they’re tools to prevent disputes, manage risk, and keep business relationships healthy. By including these often-forgotten clauses, you’ll avoid common pitfalls and keep control of your business. If you’re unsure whether your contracts cover these essentials, it may be time for a professional review. The good news? With the right guidance, strengthening your contracts is easier—and less costly—than fixing problems after the fact. 

Short answer: It depends on how your business is structured and how y ou’ve operated it. If you’re a small business owner, this is one of the most important legal questions you can ask. Whether you run a solo consulting firm, a restaurant, a retail store, or a nonprofit, understanding the risk of personal liability could be the difference between a manageable dispute and a financial nightmare. The Role of Your Business Structure The first layer of protection comes from how your business is set up: • Sole Proprietorship or General Partnership: You are the business. If the business is sued, your personal assets—bank accounts, home, etc.—are at risk. • LLC (Limited Liability Company): Generally protects your personal assets if you follow the rules and maintain the company properly. • Corporation (C-Corp or S-Corp): Also offers personal liability protection, but comes with more formalities. In both LLCs and corporations, the legal entity is designed to be separate from you personally. That’s the whole point. But that protection isn’t automatic or bulletproof. How Personal Liability Can Still Happen Even with an LLC or corporation, you can still be sued personally in some situations: • You personally guaranteed a loan or lease. That’s a contract you signed, not your company. • You co-mingled business and personal funds. This is one of the most common mistakes that leads to “piercing the corporate veil.” • You committed fraud or intentional misconduct. Courts don’t allow business entities to shield individuals from personal wrongdoing. • You failed to maintain company formalities. Especially with corporations, sloppiness can undermine your liability shield. • You were negligent in a professional service. For licensed professionals (e.g., lawyers, doctors, architects), a corporate structure may not fully shield you from malpractice claims. Nonprofits Aren’t Immune Either If you sit on a nonprofit board or run a nonprofit, don’t assume you’re safe. Personal liability can arise if: • You breach fiduciary duties • You authorize illegal acts • You co-sign debts or leases Insurance Helps, But It’s Not a Substitute General liability insurance, professional liability, and directors & officers (D&O) coverage can all help cover defense costs or settlements, but they don’t eliminate your legal obligations. If your business is underinsured or uninsured, the risk shifts back to you. So, What Can You Do? If you’re wondering whether you personally could be at risk, that’s not something to leave to guesswork. A few things to consider: • Is your business structure actually protecting you the way you think it is? • Are you following the best practices for maintaining that protection? • Do you need to revise your contracts or change how you sign documents? • Do you need additional insurance coverage? • Are there specific risks based on your industry? Every business is different, and so is every risk profile. Let’s Make Sure You’re Protected We work with New York business owners and nonprofit leaders to help limit personal liability, fix past mistakes, and structure things the right way from the start. If you’re unsure whether your setup really protects you—or if you’ve already been threatened with legal action—let’s talk.