Good Luck For The New Year

What´s your plan?

The new year had arrived and ski season was approaching, so on a rainy morning, I brought my graphically red Bogner ski pants to Jeeves (the dry cleaner, not the P. G. Wodehouse character) for cleaning and repair. Carrying, as I nearly always do, a Leica film camera under my suit jacket, I stopped on Madison Avenue to take a photo when my Noctilux lens slipped free from its bayonet mount (a first for me), and tumbled toward the sidewalk of East 65th Street. It gained momentum, plunging downward until it landed safely atop a damp Hefty bag full fluffy, uncollected New York trash. That was a good omen for the start of the year.

Back to Jeeves: those ski pants, too Euro for Vermont but spot on for Courchevel 1850, where I had last been, and St. Moritz, where I was next heading, had been soiled due to the consequences of poor form (crash!) and, for good measure, had been sliced just above the ankles like red apples for my son’s school lunch box (due to over-zealous ski edge sharpening). The solution of Jeeves, following the cleaning, was to armor plate the inside bottom part of the legs with leather overlays that coordinated with the pants. The next time a sharp edge hit them, little or no damage should be done, all without loss to Euro styling.

The moral of the story, and not just for photographers and skiers, is that you need to be ready for when things go wrong. Sometimes, good luck will deliver a solution (a beneficent pile of garbage) and sometimes, you will just have to absorb what happens and make the best of it later (with a little bit of leatherwork). In law, luck can happen as well. The adversary who has a winnable case against you decides, just the same, that it is not worth the trouble to sue you back to the stone age. The respectable couple who own the classic six coop within the best school district falls behind on payments and is obliged to sell under market to a family sure to pass muster with the socially and financially conservative board. (Just trust me on that one.)

Good luck is lovely. It cannot, however, take the place of sound legal and business planning. Transactional lawyers, the ones who draft contracts, are the bringers of good luck. If they do what they should, you might well not need litigators, who, as was Jeeves for a pair of ski pants, are there to try to make things right when contracts go wrong. The problem is that, all too often in the fashion business, people think that luck will come without the help of lawyers and so they simply sign a long, attorney-drafted agreement handed to them by the other party, hoping everything in it really says what it is expected to say. Sometimes it does, just as it is theoretically possible that, the next time you drop something quite valuable, it will fall safely onto a stuffed Hefty bag. For small matters, going without an attorney often carries a low enough risk to be worthwhile, but when the stakes increase, so does the risk and so does the likelihood that bad luck will have bad consequences. So here is a refreshed old tip for a nice new year: feel lucky, but when the stakes in a deal are high, lawyer up. Good luck comes most often to those who plan ahead.

Credit: Alan Behr


Sharpen Your Pencils

Fashion Designers Having A Discussion

We continue now with our reflections, posted earlier (here and here), on the legal and business issues that arise when a fashion business is formed and run by two or more venturers:

You and a colleague have decided to start a new fashion business. It is best to get in writing from the start what it is you intend to do together. A non-binding but useful method is the business plan, which is typically put together to help raise funding for the venture. There is an art to creating a business plan—it has to look earnest and solidly researched, the opportunity made clear and the plan to exploit it both correct and workable. In short, it has to read like an invitation to join in executing a winning strategy. And it should be a good read. (A business plan is, after all, narrowly directed advertising.)

To start, sit down together and write out thoughts about what it is you want to accomplish. You may be surprised with what comes out. We have seen otherwise promising working relationships break up over disputes about direction and vision that could have been detected early on. You may both have agreed that handbags will be your launch product only to find, as you compose your thoughts and turn them into a plan, that you have come to believe that destiny will take you quickly into women’s scarves but that your colleague favors branching out slowly and, even then, straight into small leather goods. You will both want to have all of this buttoned up before you drop the plan onto the desk of a potential investor—or anyone else.

Beyond the business plan comes the need to document organizational responsibilities. These are private matters at first, but because they become part of both legal documents of the company and even the “culture” of your organization, they are of greater long-term importance. For example: in the event of a dispute over that or any other issue, which of you will have final say or what mechanism would you both deem to be fair to resolve the problem and move on? (If your partner is your sister, you can perhaps conference in Mom, but in most new ventures, things are rarely that simple.)

If the form of organization you choose is the limited liability company, you have a clear opportunity to set that down formally all important terms in the grounding document for the company, the operating agreement. If you choose instead to form a corporation, keep in mind that it all starts a bit differently: in the absence of an express written agreement to the contrary, majority rule is the default option. That is, the principal of one share equals one vote applies, and all power goes in the end to whoever, alone or in combination with other shareholders, controls over fifty percent of the voting shares. If no one will have a majority holding, and because you likely will want to have clear rules on more topics than just voting rights, you will be well advised to enter into a shareholders agreement. The operating agreement or the shareholders agreement should deal with all that you mean to make effective about the operation of your business—because, as your lawyer will tell you, an unwritten promise is not worth the paper on which it was not written.

However you do it, the starting point is the same: sharpen your quills and start writing—and keep at it, with counsel and advisors brought in where required—until you have created documents worthy of your best college term papers. The grade of “A” you get as a result will be reflected in the operation of a well-run and profitable business.

Credit: Alan Behr