Category: Uncategorized

By: Jordan Gerheim  CEO – Outside Chief Legal LLC

Business contracts are the backbone of your relationships with customers, vendors, partners, and key employees. When they are clear and enforceable, they prevent disputes and protect your company if something goes wrong. When they are vague or missing key clauses, they can be very expensive “lessons.”

Here are some of the essential building blocks of an enforceable business contract and the clauses every business owner should understand.

Basic Ingredients Of An Enforceable Contract

Before you worry about specific clauses, your contract needs the fundamentals:

• Clear identification of the parties and their roles
• A definite offer and acceptance
• Consideration (each side is giving or promising something of value)
• Lawful purpose and no fraud, duress, or misrepresentation

If any of these are missing, even a beautifully worded agreement can be difficult or impossible to enforce.

Essential Clauses You Cannot Afford To Overlook

1. Scope Of Work or Services

The scope of work explains exactly what is being provided, when, and to what standard. This is often where disputes start.

Good scope language includes and answers:

• What is included and what is not
• Deadlines, milestones, and deliverables
• Responsibilities of each party

The clearer the scope, the less room there is for disagreement later.

2. Payment Terms

Payment terms are more than the price. They should spell out:

• Amounts, billing schedule, currency, responsibility for transaction fees and due dates
• Late fees, interest, or other remedies for non‑payment
• Invoicing process and acceptable payment methods

Tight payment language improves cash flow and gives you leverage if the other side stops paying.

3. Term And Termination

Every contract should say how long it lasts and how it can end.

Key points:

• Initial term and any automatic renewals
• Termination for cause (for serious breach)
• Termination for convenience (with notice)
• What happens on termination (final payments, return of property, transition duties)

Without clear termination rights, you can end up stuck in a bad relationship or in a fight over how to exit.

4. Limitation Of Liability

A limitation of liability clause caps how much either party can be sued for under the contract. It is one of the most important risk‑management tools in your agreements.

Common approaches:

• Capping damages at a set dollar amount or at fees paid under the contract
• Excluding certain types of damages (for example, lost profits or consequential damages)
• Carve‑outs for serious conduct (such as fraud, intentional misconduct, or some IP breaches)

Well‑drafted limitations prevent a single dispute from becoming business‑ending.

5. Indemnification

Indemnification clauses state who pays if a third party sues because of the other side’s actions. These clauses can quietly shift enormous risk from one business to another.

Typical issues:

• Who is indemnifying whom (and for what kinds of claims)
• Procedures for notice and defense of claims
• Whether the indemnifying party must pay judgments, settlements, and attorneys’ fees

Poorly worded indemnity language can leave your company paying for someone else’s mistakes.

6. Confidentiality and Non‑Disclosure

Most businesses share sensitive information in the course of performing a contract: pricing, processes, customer lists, or other trade secrets. A confidentiality clause protects that information.

Look for:

• What is considered “confidential information”
• How it may be used and who may see it
• How long confidentiality obligations last, even after termination

If your business relies on proprietary know‑how or data, this clause is critical.

7. Intellectual Property Ownership And License

Any time content, software, designs, or other creative work is involved, you need clear rules on who owns what.

Key questions:

• Who will own IP created under the contract?
• Whether the other party receives a license to use it, and on what terms ?
• How pre‑existing IP (each party’s existing tools, templates, or technology) is to be treated?

Without this clause, you can accidentally give away core assets or lose the right to use what you paid for.

8. Dispute Resolution, Governing Law, And Venue

This is a big one for myself, a former full-time litigator, and it should be important to any party to a contract. (Our Litigation Services) Dispute resolution clauses control “how” and “where” disagreements will be handled.

Common elements:

• Whether disputes go to court, mediation, or arbitration
• Which state’s law will govern the contract
• Where any lawsuit or arbitration must be filed

These provisions can dramatically affect cost and leverage in a dispute. You will also know how disputes will be handled before they occur.

9. Force Majeure

A force majeure clause addresses what happens if an event beyond the parties’ control makes performance impossible or impractical (for example, natural disasters, major outages, government actions, or a Covid pandemic!).

A good clause:

• Lists covered events or includes a sensible “catch‑all”
• Explains what each party must do if such an event occurs (for example, notice and mitigation)
• Clarifies whether obligations are suspended or the contract can be terminated

Recent years have shown how important it is not to treat this language as throwaway boilerplate.

10. “Boilerplate” That Is Not Really Boilerplate

So‑called boilerplate provisions quietly shape enforcement:

• Entire agreement (merger or integration clause) – confirms the written contract is the full deal
• Amendment – requires changes to be in a signed writing
• Assignment – controls whether rights and obligations can be transferred
• Severability – keeps the rest of the contract in place if one clause is invalid

These short sections often decide whether a court enforces what your contract actually says or lets someone argue about side conversations and emails.

How Outside Chief Legal Can Help You In Your Contract Process

Most business owners do not need to become contract lawyers. What they need is trusted counsel to:

• Translate legalese into practical risk and business terms
• Spot one‑sided or missing clauses before the contract is signed
• Negotiate changes that protect cash flow, limit liability, and keep disputes manageable

Outside Chief Legal serves as outside general counsel for growing businesses, reviewing and drafting contracts across vendors, customers, partners, and key hires. The goal is simple: contracts that are enforceable, practical, and aligned with how you actually do business.

Our Corporate/Business Counsel Services

Meet Our Team  | Contact Us

Outside Chief Legal LLC is a modern, forward-thinking law firm serving as fractional chief legal officers and outside general counsel for businesses and their owners. With over 200 years of combined litigation, in-house, general counsel and administrative legal experience, the firm delivers approachable, comprehensive counsel that blends legal expertise with practical business insight to help clients navigate ownership complexities with confidence. OCL is a trusted partner for founders, business owners, and leadership teams nationwide. Our team brings years of experience advising clients on entity selection, tax strategy, and the legal challenges that come with starting and scaling a business. Learn more about our firm, meet our team, or schedule a Risk-Free Strategy Session to talk with an attorney about how we can help your company.

Outside Chief Legal is proud to announce that Jordan W Gerheim has been named to the 2025 Mid-South Super Lawyers® list, a highly respected peer-reviewed recognition in the legal profession. This honor reflects not only Jordan’s individual accomplishments, but also the standard of excellence and leadership that defines our firm’s work on behalf of businesses across the region.​

Jordan’s practice focuses on business litigation and strategic counsel for companies facing complex disputes, operational risk, and high-stakes decisions. Clients rely on his ability to combine courtroom advocacy with clear, business-minded problem-solving that helps them protect their interests while continuing to move forward.​

Selection to Mid-South Super Lawyers® is based on a rigorous, multiphase process that includes peer nominations, independent research, and evaluations of professional achievement and ethical standards. For Outside Chief Legal, Jordan’s inclusion on this list underscores the firm’s commitment to delivering innovative, business-focused legal support that meets the evolving needs of forward-thinking organizations.​

This recognition is one more example of the leadership and dedication our clients can expect when they partner with Outside Chief Legal.

By: Jordan Gerheim  CEO – Outside Chief Legal LLC

Buying a small business can be a fast path to growth, but a shallow due diligence process can turn a promising deal into an expensive mistake. Legal due diligence helps you understand what you are really buying and what risks come with it.

Choose the Right Deal Structure

Very early, decide whether you are buying the company itself (stock or membership interests) or its assets.

• Asset purchases let you pick specific assets and often leave many liabilities behind, but may require third party consents and new contracts.
• Equity purchases are usually simpler operationally but mean you inherit more of the company’s history, contracts, and potential liabilities and claims.

Check Corporate and Ownership Records

Confirm that the seller has clean authority to sell and that ownership is what they say it is.

• Formation documents and amendments (articles, certificates, operating/LLC agreements, and bylaws).
• Ownership records (cap table, stock ledger, membership interests, options, warrants).
• Minutes, written consents, and key resolutions, including approval of the proposed sale.

Review Contracts, Leases, and Key Relationships

Contracts can often drive most of the value in a small business. Request to see:

• Customer contracts, vendor and supplier agreements, and important partner relationships.
• Commercial leases, including renewal options, assignment and sublease rights, and any personal guarantees.
• Loan agreements, security agreements, and guarantees that could survive the closing.

Employees, Contractors, and HR Issues

Employment problems can follow you after closing if they are not identified and addressed. Obtain:

• Employee list with roles, pay, and status (employee vs independent contractor).
• Offer letters, employment agreements, noncompete and non-solicitation agreements, and contractor agreements.
• Handbooks, policies, and any pending or threatened claims, grievances, or investigations.

Intellectual Property and Brand Assets

If the brand or technology is central to the deal, verifying intellectual property ownership is essential. Request and evaluate:

• Trademarks, service marks, copyrights, patents, domain names, and key social media handles.
• IP assignment agreements from founders, employees, and contractors to the company.
• Licenses in and out, including software and technology licenses and any restrictions on assignment.

Licenses, Permits, and Compliance

Regulatory gaps can delay or even prevent you from operating after closing. Acquire and analyze:

• Business, professional, and industry specific licenses and permits.
• Evidence that the business is in good standing with state and local authorities.
• Any regulatory audits, investigations, warnings, or consent orders.

Litigation, Insurance, and Other Liabilities

Legal due diligence should line up with financial review to capture the full risk picture. Obtain:

• Summary of past and present lawsuits, arbitration, administrative actions, and demand letters.
• Insurance policies (general liability, E&O, D&O, cyber, key person) and claim history.
• Liens, UCC filings, and other security interests that affect assets you plan to buy.

Business Litigation and Disputes

How Outside Chief Legal Helps Buyers

A strong due diligence process is not just about collecting documents; it is about understanding which issues matter for your goals and using that information to shape price, structure, and protections in the purchase agreement.

Outside Chief Legal helps buyers:

• Focus due diligence on the legal issues that matter most for the size and type of deal.
• Spot red flags early enough to walk away, reprice, or require stronger protections.
• Coordinate with your tax and financial advisors so legal structure supports the business case.

Meet Our Team  | Contact Us

Outside Chief Legal serves as fractional or outside general counsel to growing businesses, handling deal strategy, legal review, and negotiation so owners and leadership can stay focused on running the company.

Outside Chief Legal LLC is a modern, forward-thinking law firm serving as fractional chief legal officers and outside general counsel for businesses and their owners. With over 200 years of combined litigation, in-house, general counsel and administrative legal experience, the firm delivers approachable, comprehensive counsel that blends legal expertise with practical business insight to help clients navigate ownership complexities with confidence. OCL is a trusted partner for founders, business owners, and leadership teams nationwide. Our team brings years of experience advising clients on entity selection, tax strategy, and the legal challenges that come with starting and scaling a business. Learn more about our firm, meet our team, or schedule a Risk-Free Strategy Session to talk with an attorney about how we can help your company.

By: Jordan Gerheim  CEO – Outside Chief Legal LLC

Many businesses begin as LLCs for simplicity, flexibility, and tax efficiency. But as your company grows, you may reach a point where converting to a corporation becomes the smartest move for long-term expansion, securing investment, or preparing for an eventual exit. Recognizing the signs that it is time to evolve your business structure is critical for continued growth and risk management.

Why Startups Favor LLCs Early On

LLCs offer easy setup, adaptable management, and pass-through taxation for owners. These features make LLCs ideal during the early stages when you want maximum control and minimum administrative burden.

The Signs It May Be Time to Convert

1. You’re Seeking Outside Investors

Professional investors, including venture capitalists and most angel investors, prefer to invest in corporations, not LLCs. Corporations make it easier to issue and track shares, create stock option plans, and handle regulatory compliance.

2. Offering Equity Compensation

Recruiting (or retaining) top talent often means giving team members equity. Formal stock option and incentive plans can be difficult to implement in an LLC and may lack the stock-based rewards that executives and key employees expect.

3. Business Expansion and Multiple Owners

A growing business with multiple owners, especially those in different states or countries, often finds it simpler to manage and transfer shares within a corporation. S-Corporations and C-Corporations also allow better preparation for mergers, acquisitions, or IPOs.

4. Planning to Go Public or Sell

If you have ambitions for an IPO, strategic sale, or major buyout down the road, a corporation is almost always required. Buyers and public exchanges expect strict governance structures and are often limited to acquired corporations.

5. State and Tax Considerations

While LLCs are tax-advantaged in many cases, there are limits as business income increases. Converting to a C-corporation may provide tax planning opportunities, especially for reinvesting profits, and S-corporation status for eligible companies can further optimize your tax situation.

How (and When) to Convert

Changing from an LLC to a corporation is a significant legal and tax event. It requires proper documentation, careful planning, and sometimes state or IRS filings to transfer property, accounts, and contracts from the LLC to the new corporation. Early consultation helps you avoid triggering unintended taxes or compliance problems.

Switching from an LLC to a corporation is more than paperwork, it is a pivotal step in your company’s growth journey. If you see any of these signs arising in your business or want to explore the right moment to convert, our attorneys can guide you through the process, minimize risks, and position your company for future success.

Meet Our Team  | Contact Us

We combine legal experience with practical business advice to help founders, owners, and executives make the best decisions at every stage.

Outside Chief Legal LLC is a modern, forward-thinking law firm serving as fractional chief legal officers and outside general counsel for businesses and their owners. With over 200 years of combined litigation, in-house, general counsel and administrative legal experience, the firm delivers approachable, comprehensive counsel that blends legal expertise with practical business insight to help clients navigate ownership complexities with confidence.  OCL is a trusted partner for founders, business owners, and leadership teams nationwide. Our team brings years of experience advising clients on entity selection, tax strategy, and the legal challenges that come with starting and scaling a business. Learn more about our firm, meet our team, or schedule a Risk-Free Strategy Session to talk with an attorney about how we can help your company.

By: Jordan Gerheim  CEO – Outside Chief Legal LLC

Your first year in business is full of complex decisions. Many founders make preventable legal missteps that can threaten their company’s survival, sometimes before it even begins. Here are 10 key mistakes to avoid (and 10 examples of their potential fallout) if you want a strong foundation for growth.

1. Failing to Create a Legal Entity

Some startups begin operating without forming any formal business entity. Running as a sole proprietorship or even a general partnership exposes founders to unlimited personal liability, tax complexity, and difficulty raising capital. Proper entity creation, such as an LLC or corporation, gives essential protection, credibility, and structure.  Let us help!

Ex: Three friends start a food delivery service but never register as an LLC or corporation. Two years later, a delivery accident leads to a lawsuit that puts their individual homes and personal savings at risk.”

2. Choosing the Wrong Business Structure

Even when founders do create a legal entity, picking the wrong type (LLC, corporation, partnership, etc.) can result in higher tax burdens, riskier personal liability, or obstacles to growth. Consult an advisor to match your structure to your goals and to protect assets.

Ex: A startup picks a general partnership for speed and ease only to discover in tax season that they owe twice what they budgeted, and each founder is personally liable for a vendor dispute.

3. Skipping Clear Founders’ and Operating Agreements

Without documented founder roles, equity splits, vesting schedules, and procedures for exits, startups invite confusion and disputes. Create operating agreements for LLCs and comparable documentation for partnerships and corporations.

Ex: Co-founders verbally agree on a 50/50 split but never document it. After a year, one tries to leave with company IP and half the revenues, launching a costly legal battle.

4. Overlooking Employment Law and Worker Classification

Misclassifying workers (employees vs independent contractors), missing payroll taxes, or neglecting wage laws leads to fines and lawsuits. Every hire should be formally onboarded and in full legal compliance.

Ex: A company hires contractors instead of employees to save on costs, but state regulators reclassify (or correctly classify) them, resulting in back taxes and fines.

5. Ignoring Intellectual Property Protection

Not securing trademarks, patents, copyrights, or trade secrets can allow others to copy essential assets, stalling your company and inviting legal trouble. Not including their protection in contractual relationships with internal and external partners. Assign, register and protect IP early.

Ex: A competitor registers a startup’s brand as a trademark first, forcing the business to rebrand after gaining early customer traction.

6. Neglecting Licenses, Permits, and Tax Reporting

Operating without mandatory licenses or missing tax registrations results in shutdowns, fines or penalties (or not getting paid for work/services provided). Register as required and file timely reports, even with zero income.

Ex: An app developer launches a mobile app in several states but fails to collect or remit sales tax, facing penalties and emergency shutdowns. Ex No. 2: A contractor fails to obtain required licensure to provide work to homeowner. Dispute arises and homeowner files complaint with licensure board leaving contractor facing fines/penalties and likely not being paid for work done.

7. Mixing Personal and Business Finances

Blurring boundaries by commingling accounts weakens liability protection and creates headaches at tax time. Separate and document all business transactions.

Ex: A founder pays business expenses from a personal account, resulting in messy records and a denied business insurance claim after a loss. They could also lose the protections of their “corporate veil” by failing to uphold the corporate formalities – including this one.

8. Using Unvetted Online Templates for Contracts

Generic contracts often leave loopholes and may not comply with local laws. Professional review or customization helps secure enforceable agreements.

Ex: Founders download a free partnership contract online that does not comply with their state’s rules or their desired relationship, and later realize they cannot enforce crucial terms when a dispute arises.

9. Overlooking Data Privacy and Website Requirements

Missing privacy policies and weak data protection exposes your business to disputes and fines, especially online. Early compliance safeguards your brand.

Ex: A subscription box service collects customer data but ignores privacy laws, leading to customer complaints and a regulatory investigation.

10. Failing to Document Equity Grants and Secure Insurance

Without written equity agreements, future fundraising or founder exits create costly disputes. Operating without insurance exposes you to liability for claims, errors, or disasters.

Ex: A team member claims they own company shares promised in an email, but no signed agreement exists. So, a costly legal dispute stalls investment and distracts leadership.

Many founders wait too long to get legal counsel. Early advice helps reduce risk, save money, and lets you focus on growth. Outside Chief Legal helps startups nationwide avoid these preventable mistakes and build resilient businesses. Schedule a consultation or connect with our team to protect your startup and move forward with confidence.

Outside Chief Legal LLC is a trusted partner for founders, business owners, and leadership teams nationwide. Our team brings years of experience advising clients on entity selection, tax strategy, and the legal challenges that come with starting and scaling a business. We offer personalized guidance in LLC formation, incorporation, raising capital, and ongoing business compliance. Learn more about our firm, meet our team, or schedule a Risk-Free Strategy Session to talk with an attorney about the right structure for your company.

Recognition built on results.

We’re proud to announce that Outside Chief Legal has been named among the 2026 Best Law Firms®, earning recognition for our excellence, innovation, and client-centered approach.

⚖️ Metropolitan Tier 2 – Construction Law and Corporate Law

⚖️ Metropolitan Tier 3 – Business Organizations (including LLCs and Partnerships), Commercial Litigation, and Litigation – Insurance

This honor reflects more than rankings — it’s a testament to trust. To the businesses who rely on us, the peers who recognize our work, and the standard we set every day to redefine what legal partnership looks like.

By: Jordan Gerheim  CEO – Outside Chief Legal LLC

Choosing the right entity is one of the most significant decisions for any business owner. The two most common options, a Limited Liability Company (LLC) and a Corporation, each offer distinct benefits between them in terms of taxes, liability protection, and scalability. Understanding these differences is important to building a business structure that supports your goals now and in the future.

Why Form a Business Entity To Begin With

To begin with, establishing a business entity serves two (2) fundamental purposes for business owners: liability management and taxation. First, creating an entity separates personal assets from business obligations, helping shield owners from liability for debts, lawsuits, or other business risks. Second, the choice of entity affects how the business and its owners are taxed, shaping everything from annual tax bills to options for deducting expenses, distributing profits, and planning for growth. Understanding these dual roles of an entity is the starting point for selecting the structure that best aligns with long-term business goals.

Tax Implications

Taxation is the fundamental distinction between LLCs and corporations.

By default, an LLC is a “pass-through” entity. Profits and losses are reported directly on the owners’ personal tax returns, avoiding corporate-level tax. Owners typically pay self-employment taxes on their share of income. However, an LLC can elect to be taxed as a corporation, which may provide flexibility for certain tax planning strategies.

A traditional C Corporation is a separate taxable entity. It pays corporate income tax, and then any profits distributed to shareholders as dividends are taxed again at the individual level (i.e. “double taxation”).

“My Business Is An S-Corp”

We hear this from business owners a lot. An S-Corporation or “S-Corp” is not a form of legal entity. It is a federal tax classification that eligible companies can elect with the IRS. Both LLCs and corporations can choose S-corporation status, provided they meet IRS qualifications (including a 100-shareholder limit, only one class of stock, and U.S. citizen or resident shareholders). S-Corp status enables a business to enjoy pass-through taxation, so profits are reported on owners’ personal returns, avoiding double taxation faced by C-Corporations. S-Corps can help minimize self-employment taxes in certain situations, but they come with restrictions on ownership and share structure, increased regulatory compliance, and potential state-level differences.  Should you elect S Corp status? Ask us for our S Corp Eligibility Guide

Learn more about tax strategy for your business with Outside Chief Legal (Business Tax Planning)

Liability Protection

Both LLCs and corporations provide limited liability protection, separating business debts and legal risks from owners’ personal assets. Under normal circumstances, both should limit the member or shareholder’s liability to their investments in the company.

LLCs: Owners (or “members”) are generally not personally responsible for business liabilities.  This protection covers debts, legal judgments, and claims resulting from business activities or employee actions, except in cases where an owner personally commits wrongdoing, guarantees a loan, or fails to maintain the LLC’s formal separation.

Corporations: Shareholders are also protected by limited liability, meaning their personal assets are generally shielded from the debts, obligations, and lawsuits of the corporation, again, except in cases involving fraud, co-mingling of funds, or other exceptions.

Corporate Formalities & “Piercing the Corporate Veil”

These protections are not absolute. If an LLC or C corporation fails to adhere to required formalities (such as keeping separate finances, maintaining proper records, and not commingling assets), or if the entity is used to commit fraud or injustice, courts can “pierce the corporate veil.” This results in ignoring the separate legal existence of the entity and holding the owners personally liable for the business’s debts or obligations. The principles and tests for piercing the veil are generally similar for LLCs and corporations, though specifics can vary by jurisdiction.

Maintaining corporate formalities and respecting the entity’s separate status is essential in both LLCs and C corporations to preserve liability protection for owners.

Understand liability protection and entity setup with Outside Chief Legal

Business Litigation Services and Risk Advice

Scalability and Growth Potential

Scalability is key for owners who want to grow, raise capital, or one day sell their business. Both entity types offer different advantages.

LLC Advantages: LLCs offer flexible management and minimal required administration, making them popular for small-to-midsize or closely held businesses.

Corporation Advantages: Corporations are preferred by venture capitalists, angel investors, and public markets. They can issue stock and make ownership transfers easier, supporting rapid or large-scale growth.

Many business owners start as LLCs for flexibility, then convert to corporations if their goals or needs change.

Which Is Right for Your Business?

Selecting your structure depends on your size, growth plans, industry, ownership needs, and readiness for compliance obligations. LLCs work well for flexibility, fewer formalities, and simple taxation. Corporations offer clear structures and are essential for ambitious growth and outside investment.

The optimal choice can change as your business matures. The decision benefits from a clear-eyed evaluation of legal, tax, and business planning considerations.

Our firm regularly helps business owners and leadership teams select and adapt the right entity for long-term success. If you are weighing your options or preparing for growth, our attorneys can guide you through each step to ensure you are protected and positioned for what’s next.

Outside Chief Legal LLC is a trusted partner for founders, business owners, and leadership teams nationwide. Our team brings years of experience advising clients on entity selection, tax strategy, and the legal challenges that come with starting and scaling a business. We offer personalized guidance in LLC formation, incorporation, raising capital, and ongoing business compliance. Learn more about our firm, meet our team, or schedule a Risk-Free Strategy Session to talk with an attorney about the right structure for your company.

By: Jordan Gerheim  CEO – Outside Chief Legal LLC

There is a moment in every growing company’s life when someone in leadership asks the (potentially) obvious: “Do we need our own lawyer? Are we too big to keep calling outside counsel every time we have a legal question?”

I am working with a coveted client on this evaluation now.

The question, timing and evaluation makes absolute sense. The company is scaling (or continues to scale – that is expanding to increase revenue or output). As a result, legal issues are becoming more and more frequent and complex. Perhaps having a dedicated in-house general counsel or attorney makes economic sense.  Could they bring one or more attorneys in-house who can learn (or already knows) their business intimately, understands their culture, and can focus exclusively on their needs.

If you are currently evaluating whether in-house counsel is a logical next step for your company, you are right to evaluate the decision on many fronts. The problem is that this decision is far more complicated than the salary number on the offer letter suggests. Many companies pursuing in-house counsel overlook significant hidden costs and operational complexities. Before you commit to this path, you should understand the full financial picture and the tradeoffs involved in your evaluation.

Understanding the Full Cost Picture

Continue reading “Evaluating the True Cost of In-House Counsel: A Decision Framework for Growing Companies”

By: Jordan Gerheim    CEO | Outside Chief Legal Officer | Litigator | Strategic Business Advisor

As fractional Chief Legal Officers and outside general counsel serving businesses across multiple industries, we see a similar pattern repeated over and over: smart, successful business owners making costly decisions simply because “that’s what everyone else does.” By following the latest industry trend, too many businesses fall into the trap of “herd mentality” without questioning whether these practices actually serve their unique needs.

The business world is full of conventional wisdom that sounds logical on the surface but often fails to deliver when examined through the lens of your specific circumstances. This is why the most valuable legal advice we often find we give is not about which forms to file or clauses to include, it is about developing the habit of asking “Why?”.

The hidden costs of blindly following business practices extend far beyond direct financial expenses. Herd mentality can lead to:

Resource misallocation when you invest in solutions that do not address your actual problems

Strategic confusion when your business practices do not align with your actual business model

Competitive disadvantage when you follow the same playbook as everyone else in your market

Cultural misalignment when policies and practices do not reflect your actual values and operations

Legal vulnerabilities when generic solutions do not account for your specific risk factors

A couple common examples…

When “Business-Friendly” Becomes Business-Expensive

Start with perhaps the most pervasive myth in business formation: that incorporating in Delaware is automatically the best choice. The statistics are compelling, more than 1.9 million businesses have registered in Delaware, including two-thirds of Fortune 500 companies. This creates a powerful narrative that Delaware incorporation equals success and sophistication.

But ask why Delaware incorporation makes sense for your business specifically. For most small to medium-sized businesses operating primarily in their home state, Delaware incorporation can create unnecessary complexity and cost without delivering meaningful benefits. You could pay higher initial filing fees than most other states, increased registered agent fees and potentially annual franchise taxes based on your authorized shares. If you are conducting business in your home state (not named Delaware), you will also need to register as a “foreign corporation”” and pay additional fees there as well.

The Delaware Court of Chancery and extensive corporate case law that have made Delaware attractive to large public companies rarely benefit smaller businesses. Most small business disputes do not involve complex corporate governance issues requiring Delaware’s specialized expertise. More importantly, if you are seeking outside funding or “going public,” investors will often require Delaware incorporation anyway, making early incorporation there premature until you actually need it.

The Double-Edged Sword of Alternative Dispute Resolution

Arbitration clauses have become ubiquitous in business contracts, often included automatically because they are perceived to be a “faster, cheaper, and more flexible” alternative to traditional litigation. The logic seems sound: avoid crowded court calendars, reduce discovery costs, and maintain privacy. However, this one-size-fits-all approach ignores the significant downsides of arbitration that may not align with your business’s dispute resolution needs.

The reality is more nuanced. While arbitration can reduce overall costs in some cases, arbitration filing fees can reach into the many thousands and arbitrators themselves can often charge $800 per hour or more. These costs are borne by the parties rather than taxpayers. In many cases, you cannot choose your arbitrator, and there may be no guarantee they are experts in your particular matter, much less the law.  More critically, arbitration severely limits your legal options. There is generally no right to appeal arbitration decisions, even in some cases of gross error or misconduct. You lose the right to a jury trial, potentially limiting damage awards, particularly in cases where emotional harm or punitive damages might be appropriate.

For businesses that rely on public accountability or need the deterrent effect of public litigation, mandatory arbitration clauses can actually be counterproductive. They may also limit your ability to join class actions or pursue certain types of statutory claims that require court intervention.

The Strategic Value of Contrarian Thinking

The most successful businesses are not those that faithfully follow conventional wisdom, they are those that question conventional wisdom most effectively. Business leaders who take a contrarian stance can use the herd’s thinking to pressure-test their own information before making critical business decisions.

This does not mean being contrarian for its own sake, but rather developing the discipline to evaluate each business practice based on your specific circumstances rather than industry norms. Sometimes the conventional approach will be right for your business; sometimes it will not. The key is making that determination consciously rather than by default.

 Five “Why” Questions Every Business Decision Should Answer

1. Why does this practice exist? Understanding the original problem a practice was designed to solve helps you evaluate whether that problem applies to your situation.
2. Why is this practice common in my industry? Industry practices often persist because they solved problems that no longer exist or addressed the needs of businesses very different from yours.
3. Why would this practice benefit my specific business model? Generic benefits rarely align perfectly with specific business needs.
4. Why now? Timing matters. Practices that make sense at one stage of business growth may be premature or outdated at another.
5. Why not alternatives? Every business practice involves opportunity costs. What else could you do with the time, money, and attention required by conventional approaches?

What Is Best for You, Not What Everyone Else Is Doing

Our focus and commitment as your fractional CLO and outside general counsel is not to implement what everyone else is doing, but to understand what is best for you and your specific business. Every recommendation we make is grounded in analysis of your actual needs, risks, and opportunities rather than industry conventions or legal template libraries.

When you work with a legal team that prioritizes strategic thinking over conventional wisdom, you get legal guidance that serves your business objectives rather than legal objectives that happen to involve your business. We question every assumption, challenge every “industry standard,” and evaluate every practice through the lens of your unique circumstances.

The most expensive legal advice is not the hourly rate you pay, it is the cost of implementing practices that do not serve your business. The most valuable legal advice helps you build a business structure and legal framework that advances your specific goals rather than following others’ playbooks.

Before you follow any business practice simply because it is common, ask why. The answer might surprise you, and it will almost certainly save you money while better protecting your business.

Jordan leads Outside Chief Legal LLC (OCL), a modern, forward-thinking law firm that redefines how businesses and their owners access legal support. OCL works to remove the common barriers preventing many from seeking the legal counsel they need — such as fear of unknown or high costs, lack of legal experience, and overly complex legal jargon. OCL serves as fractional chief legal officers and outside general counsel for businesses of all sizes drawing on over 100 years of combined litigation, in-house, and general counsel experience. It delivers approachable, comprehensive counsel that blends legal expertise with practical business insight to help clients navigate ownership complexities with confidence. As a seasoned litigator, general counsel, and entrepreneur himself, Jordan personally understands the legal and business challenges businesses and their owners face. Jordan and OCL are committed to providing the modern legal support today’s companies need.

Outside Chief Legal is proud to announce that Jordan Gerheim and William Lancaster have been named to the 32nd edition of Best Lawyers®, one of the most highly regarded peer-review recognitions in the legal profession.

This distinction reflects not only their individual achievements but also the broader standard of excellence that defines our firm. Jordan and Bill’s work spans litigation, business law, and employment law—fields where their knowledge, advocacy, and client-centered approach consistently deliver meaningful results.

Selection to Best Lawyers® is driven by rigorous peer review and recognizes attorneys who demonstrate outstanding professional skill, integrity, and dedication to their clients. For Outside Chief Legal, this recognition underscores the firm’s ongoing commitment to providing innovative legal support tailored for forward-thinking businesses.

With this recognition, Jordan and Bill continue to represent the caliber of legal leadership that makes Outside Chief Legal a trusted partner for businesses navigating complex challenges.