Protecting Your Business: Legal Strategies Every Founder Needs with Matthew Fornaro

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Hey everybody, welcome to today's episode of B2B Vault, the Biz to Biz podcast, sponsored by Nationwide Payment Systems and our new payment platform NPS1 that can power all your payments, e-commerce, and invoicing. So today we're going to dive into the world of legal stuff, which I always find interesting to talk to attorneys because as a business owner, there's things that you need to know legally what you're dealing with, from everything from corporations, signing contracts, all kinds of different things. So we're going to dive into that today with Matthew Fornaro from FornaroLegal.com. I'm in Fort Lauderdale and he's right down the street in Coral Springs, so he's— we're local. And, uh, I like that Matthew went to University of Florida. Go Gators!

So thank you.

Go Gators! So Matthew, tell us a little bit about yourself.

Well, thank you for having me, Allen. Uh, you pointed out two things. I went to the University of Florida for law school and I'm in the mean streets of Coral Springs. Actually, I live in Parkland now, but my office is in Coral Springs, but I consider myself a Coral Springs native. So yeah, so I'm a business law attorney. I've been practicing law for 23 years. I focus on helping small businesses, entrepreneurs, and startups with their legal issues, whether it's transactional or litigation. I used to work for two big AMLAW 200 law firms, and about 11 years ago I decided to go out on my own. And I wanted to focus on helping small businesses, entrepreneurs, and startups. So that's what I've been doing for the last 11 years. And here I am on your show.

All right. So what made you want to become a lawyer? Some people have told me I should be a— should have been a lawyer, but I don't know. Tell me, why did you want to become a lawyer?

Sure. So growing up, I was into watching, like, believe it or not, The People's Court. All right, and, uh, I always found like that fascinating. I found like legal stuff fascinating, but I wasn't like an LA Law fan or anything like that. I think I was too young. And then, uh, wasn't a Law Order fan. That kind of came along too late. So I like that. I always kind of knew I wanted to be an attorney. I went to undergrad and was a political science major, so that makes me unqualified to do anything except being an attorney or live in Washington, D.C. and be a politician. So then I went to law school, came out, worked at a boutique firm in Boca Raton doing commercial litigation. Then I worked at two big AMLAW 200 law firms doing commercial litigation, representing mostly big banks, insurance companies, and corporations. And then, like I said, 11 years ago, I had the opportunity to go work at an even bigger firm and work for even bigger clients. But then I decided I wanted to zig instead of zag. I decided to start my own law firm, and I wanted to focus on small businesses and, you know, things related to small business, particularly out in the suburbs, because I felt that they were underserved by big firms and by local attorneys. And that also came about because growing up, my dad was an entrepreneur. He had his own business. He's retired now, but I saw some of the issues he dealt with as a small business owner, and I wanted to help people in that situation with my professional acumen, which is what I've been doing for the last 11 years.

Yeah, it's interesting, you know, like I've been in business for about 30-plus years, and I'll never forget when I first started in business, it's a good thing, you know, that I had some cousins and some really good friends that were lawyers. And I remember, um, I was having— I was— I had a job and Some of the, you know, handshake stuff didn't work out. And then I was going to go to another job, and I was a chef at the time. And I said to my cousin, I said, you know, this time I want to have a contract of, you know, a contract that outlines, you know, my— what I'm bringing to the table and what they can't steal when I leave. You know, if they— when I leave, they cannot, you know, take, you know, use my, my name, image, and likeness, right? And it paid off later. But one thing, you know, I always tell business owners, you know, you're like, you have to have a legal entity. I'm sure you help with that. You know, you're going to get a lease. You know, you need to read your lease and know what you're responsible for, you know, in a lease. A lot of times people sign a lease. I've talked to many business owners. They sign a lease and then the next thing they find out Oh, the air conditioner breaks and they didn't read the lease and they're responsible for the air conditioner, or they move into a space and they need 220 electricity. They didn't ask the landlord about it and now they don't have 220 electricity and they're, you know, and then the lease, they're responsible to fix all these things. So, you know, reading leases and reading agreements and things like that is super important. And a lot of times people don't go to an attorney, you know, You know, ChatGPT is not your attorney. You know, can give you some basic information, but you really need an attorney when you're signing lots of documents, you're opening a business. You know, people say your first, your biggest investment in your life is usually your house, right? Your second biggest investment, or maybe your first, maybe you don't even own a house, is your business. So give us a little insight on that.

Yeah, that's true. I mean, look, the internet and ChatGPT are great, but they're not substitutes for professionals. So, you know, you need a business law attorney, you need an accountant, you need a banker. You pointed out all those nice documents. They're great when they work out, but when they don't, they're not so great. And so you need a business law attorney to help you draft and review those documents, no matter what point you are in your business or no matter how big your business is or how small your business is. If you you have relationships with other people or other entities, then you need contracts, and you need those contracts drafted, reviewed, and revised by business law attorneys.

So, you know, one mistake I've seen businesses make is when they're picking out the name, they don't do a lot of research on that, um, and that, that seems to cause a lot of problems also. You have any insight on that?

Yeah, you know, starting a business, you know, we're both here in Florida, so I'm going to use Florida as an example. You know, starting a business really isn't that hard in Florida. It's like a least common denominator thing to just get up and going, but to do it right is a totally different burden and a totally different set of hurdles. So, you know, I can go on to SunBiz, which, you know, for your listeners is our local Secretary of State Division of Corporations website, and I can just— as long as the name's not already taken in the form of a business organization in Florida, I can incorporate or I can form an LLC or do whatever. It doesn't mean that I'm not going to get in a lot of trouble for doing it. It just— they do the least amount of due diligence or whatever possible to permit you to start your business. And then I'm in business. So if I wanted to, I could go online and form, you know, Feneros Coca-Cola LLC, go online, and as long as it's not taken by the state, that someone's already using in the state of Florida, I can register it as my business.

Oh, Coca-Cola.

Am I going to have a lot of problems? Yes, I am. But you know what? I got a business registered with that name. So that's why, you know, there's a big disparity between just being able to go and do something like start a business by, you know, going online to Sunbiz or wherever it is you're located and do it and do it the right way. And you can't just use any name you want. You have to use like a novel name or something that's related to you or your business. You can't use someone else's name, although there are, you know, if you go on Sunbiz and type in like, you know, like just generic terms, there's like 50 businesses that are 100 or 1,000 businesses that are different variations of those generic terms. So, you know, you want to consult with a business law attorney or, you know, or, you know, I mean, a business law attorney to come up with— before you even start doing anything, there's a whole bunch of things you need to do. One of them is what is your name? So you have to come up with a viable name.

And so what's one mistake a lot of business owners make?

Sure. They jump right into getting into business and go right on Sunbiz and start doing their business without the necessary due diligence. So they skip over 3 important concepts that a lot of businesses continually skip over. And the 3 important concepts are: 1, before you start a business, make sure you have a written business plan that tells you all about the who, what, when, where, why, and how about your business before you even start it. So the roadmap for your business, it tells you how you, you know, get bigger, how you get smaller, how you add people, how you subtract people, what you're going to do, how you get money, where you're going to bank, all that stuff. And so a lot of people just skip step 1 and just go straight into business. And so they go, like I just said, online, they register or whatever, and then they skip step 2, which is having written operating or written governing documents for your business. So like I said, you can go on to Sunbiz and start an LLC or corporation or a partnership or a DBA or whatever. And like I said, within 5 minutes, you're gold, you're online. So that doesn't mean that it's sufficient and that doesn't mean you're going to have major problems. That just means you did the legal minimum that the state of Florida requires. So a lot of people just do that and they start a corporation or they start an LLC and they do it without having articles of incorporation. They do it without having bylaws. They do it without having an operating agreement. They do it without having a partnership agreement. And that's going to cause major problems down the road, whether you're successful or unsuccessful. So Need to have that in place before you go on Sunbiz and do that stuff. And a lot of people skip that. The third thing that a lot of people skip is, you know, they're very excited and eager to get in a business. You know, they're an entrepreneur, they're founder, whatever you want to call them. They want to get in there and start doing stuff. And they don't understand that they don't have to do everything themselves. They don't have to be a one-man or one-woman band. There's professionals who help you do things and professionals who focus on doing things. So that you don't have to do those things. So they skip consulting with an attorney, they skip consulting with an accountant, they skip consulting with a banker, they skip consulting with like an HR company if they have employees or whatever, and they just jump right in. And before you know it, instead of them, you know, running a gym or, you know, selling cookies online or whatever their business is, they're, you know, they're their own HR manager or their own, you know, accountant or their own attorney in addition to doing all that stuff. So they run into a lot of issues because it takes away from them focusing on running the business, which is what they should focus on, and have the professionals do the professional work. So those are your— probably your 3 biggest things that most entrepreneurs and startups do is 1, 2, or 3 of those things that I just said they skip out on and just go straight for being in business.

Yeah, a lot of times you have to— I remember one time I had a client down here and they were opening a restaurant and went over, they invited me to come over, you know, we're going to get the merchant account set up for them. And I go over, I see the name of the restaurant, and I go, did you guys like check that out? And they were like, what? And I'm like, that's like a— there's a restaurant with that name in Chicago, and it's owned by a huge company, and I— and it's been around for a long time, so I would guess that it's probably trademarked. Because of the size of the company that owns it, a public company. They probably trademarked the name, right? And I said, you guys better check that out. They didn't even get— they didn't even open the doors yet and they got a cease and desist. And they already bought like the sign and they had chairs with the name on it and tables and glassware and plates. I mean, they must have spent like spent several hundred thousand dollars on all this stuff, and they had to rip it all out and start from scratch.

Yeah.

And it's, you know, and I've seen that happen to people before, um, where they had, you know, they just— you picked and they picked a name, and then the next thing you know, they're getting a cease and desist letter.

Yeah, it's part of the due diligence that goes into having your business. You got to do a bunch of heavy lifting on the front end before we even get started. And one of them is picking out the right name.

So the other thing that me and you were talking about when we were getting to know each other and talking, we were talking about, you know, some of the struggles that business owners go through. And one of them was chargebacks and how can business owners, you know, Obviously, we try to tell people like you can put roadblocks in the way so people can't do a chargeback. There's no way to stop anybody from doing a chargeback because it's part of the cardholder's contract that they can do it. So, but, you know, and then, you know, you have to try to win the chargeback. So we teach business owners how to do things right. And then sometimes there's scammers out there that scam the business and somehow they, you know, do, do what they trip the business owner up one time a little bit in the process that they might be doing. They didn't sign something or whatever that might be. And then now the business loses a chargeback. So you mentioned that that's something that you might have a remedy for. Tell us about that.

Sure. So obviously, Allen, you deal with point of sale, you deal with, you know, credit card processing. You're knee-deep in the world of chargebacks. I've dealt with many chargebacks over the years on behalf of my clients. And, you know, I also at the same time represent banks and credit card companies. So I know the issue on all angles. So I can tell you from a business owner standpoint or whatever, You know, I don't have to tell you, you know this, but in a chargeback situation, you know, it is a, at best, unlevel playing field that's in favor of the consumer because you're the big business, you can afford to take the hit. They're the consumer, they can't. So a lot of things get resolved in their favor when necessarily, should they be? Not really. It's not really a democratic forum, the chargeback process.

So let me, let me just tell you, I just did a LinkedIn poll where I posted on LinkedIn who decides the chargeback. So there was 4 answers and the one answer was the, the merchant, the merchant service company was A, B was Visa, MasterCard, Discover, American Express. C was the chargeback department, and answer D was the cardholder's bank, the card issuer, right? Only 56% of the people that answered the poll answered D, and that's the correct answer. So the 44% gave the wrong answer, right? The The merchant company, we don't decide the chargeback. Our bank doesn't decide the chargeback. The chargeback department doesn't decide the chargeback. And the card brands don't decide the chargeback. So the card— this is the part, like you said, it's not level playing field, because the cardholder does a chargeback and then their bank, who they're the customer of, is going to be the one to be the the referee. That's what I don't think. That's fair.

Yeah. Well, it's also kind of the same, you know, a little bit attenuated, but kind of the same thing with like a, you know, like a close call car accident where there's two insurance companies on the side. The insurance company always goes with their insured over the other driver no matter what. And, you know, it's kind of the same thing with the chargeback as they go with the cardholder over the merchant. So I've dealt with this issue many times. I actually have a guy who left me a message who needs me to call him back regarding a chargeback. He's a used car dealer, so someone charged back a used car. So I'm going to look forward to that conversation. But you know what I've done? And one of the things I've had is I've had my clients strengthen their contracts with their consumers, their buyers, whatever you want to call them, or their terms of service. Where they specifically say that the, you know, debtor— you want to call them whatever you want to call them, the customer, the debtor, the consumer, or whatever— is 100% liable for the charge. And so if there's a chargeback, that is non-demonstrative and not binding as to the fact that they still owe the money. And because a lot of people like to wave that they won the chargeback when something happens or whatever, and they try to say, oh, I was dispositive of the issue, I was in the right, and it's not that way. So I have my merchants or my merchant clients or my people who do sales or whatever where they use credit cards, as I make sure they have specific in their terms of service and in their contracts that they, you know, the chargeback process is meaningless and that, you know, they owe the money and that they're liable. They're liable for the money and either have them be personally liable for the money, which is always best versus them trying to pin it on like a phantom business or something. So you have personal liability, you can have like a personal guarantee on there depending on what it is you're selling or how you're doing it so that they can't get out of it even in bankruptcy. And, you know, have, you know, like straight dispute provisions where instead of going to some bizarre forum or whatever, you can go straight to court. So I've worked on that a lot with my clients, and I've had a lot of success over the years of them getting the right to then go get the money from the end user where the end user was playing games and did a chargeback and tried to get out of it. So you can't just take your credit card processor or your credit card company's, you know, form for granted. You can't take their word for granted. You have to have your own, you know, bespoke documents in place that govern your relationship with your customer, your consumer, your end user, whatever, that say that they're liable for the debt and that, you know, you're coming after them for the debt and you're entitled to your attorney's fees costs. Make sure there's a venue permission, all that stuff in there. So then that way when they, you know, if they play games with the chargeback or whatever and they win the chargeback, then okay, great. That would have been great if I just kept the money. Now I'm going to have to go get it. And the fact that you won the chargeback is not going to be a negative influence in your favor against me for me going to actually get the money against you.

Yeah, it's super important. We look at people's like, you know, we tell them, you know, get— do you have people sign a contract? Is there a an authorization form, right, that they're authorizing the charge. And, you know, like today with like especially with digital services like building websites and things like that, it's important that the, you know, that the merchant when they're dealing with, you know, another business owner, that they get them to sign off at the end that, oh yeah, the project was completed.

Yeah.

Whether it's weekly project updates or monthly And that way, you know, if somebody does try to do a chargeback, you can prove like, oh, I did the work and it was completed satisfactorily. And a lot of people like to skip steps and just say, yeah, I'm collecting the money. And it doesn't work like that because you need to protect yourself, you know, from every angle. And like you said, put it— especially like used car dealers, man, they deal with like crazy stuff.

Like, yeah, you got to make sure, no Exactly.

So we have a few of them. So one of the things that we make sure that they do is on the credit card authorization form, it says the name of the owner of the car. And then if somebody else is— what this is, what usually happens at used car places, let's just, you know, then somebody else like makes a payment for them. Yeah, the down payment for them. They can't get out of it because they have like a whole paragraph on there that they know that they're signing for somebody, you know, for whatever. Billy Bob is signing for Mary— is, is paying for Mary Jo's car payment, blah, blah, blah, blah, blah. And they have to sign it so that way they can't really get out of— and out of, out of doing that. And they only take, um, debit cards and not credit cards. No, that way it's a lot harder to, to do a chargeback, although, you know, because they have to go to the bank and, you know And, you know, with debit is, is a little bit handled a little bit different than credit because a debit chargeback is what we call a Reg E. So, but, you know, like I said, they, they win pretty much all of their chargebacks. This couple of these car places we have is that very, very tight paperwork. And the person just can't say, oh, well, I broke up with the girl, so I want my money back.

Yeah.

They can't do that, but people try.

They try. Trust me, I've seen it in doing a lot of credit card work. I've seen people try to get out of stuff for crazy, crazy reasons. And, you know, they got no shame trying. It's funny. Sometimes it's pretty entertaining.

We had a guy trying to get out of— he wanted to stop payment on a $17,000 job because he didn't like the the lock on the gate. You know, in Florida, when you have a pool, you have to have a high lock, you know. Yeah, the guy didn't want the lock that high, and the pool got— the guys who put the gates up and everything said, no, yet by law you have to have this. It passed inspection. We can't put it, you know, down here. It has to be up high because that's the law. And the guy wanted— the guy tried to charge back and We sent the law and the paperwork from the city and all that to the chargeback department. And they said if the guy wants a different lock, we'll give him back $500, you know, and he can go put his own lock on. But we can't do that because we would then be liable if somebody drowned in the pool. Yeah, no, but people will try anything. So tell us, like, if you're going to give a business owner Let's say 3 pieces of advice, right, on why they should use an attorney. I have friends of mine, they're like, oh, attorneys are too expensive. And I'm like, that's your life, man. That's— you're, you're pouring money into this business. You're making an investment, right? You're doing things, you know, you need to have protection so that, you know, just in case something happens, you know, you need to read the lease. You know, you know, all of a sudden you got to replace the air conditioner on a retail space. It could be $8,000 to $10,000, you know, and you just rented the place. You know, you don't have dollar one coming in and now you have no AC, right?

Yeah.

So that's why it's important. So what's like 3 things you would tell people? They're starting— someone starting up a business. What would you say?

Well, it would be the 3 things that I said previously of the 3 things that they skip.

Right.

Do those 3 things that you always skip. And then let's say, all right, let's say that's number 1. Do the 3 things you always skip. Number 2 is have a contract for everything. If you have a relationship with any other person, business entity or whatever, have a written contract that specifies exactly what that relationship is. What happens when someone breaches that relationship? Make sure it has a venue provision. Make sure it has an attorney's fee provision. Make sure it clearly identifies all the terms. Don't leave it to chance. You can put it on your terms of service. You can put it on your invoice. It doesn't have to be some front-facing crazy phone book that you hand someone and tell them to sign it. It can be part of your regular business process. And then third thing would be is to, you know, make sure you uniformly and objectively comply with all your business formalities, no matter how big or how small your business is or how, you know, lax it is, if it's online or in person, whatever. Comply with business formalities because if you don't, you're going to have problems because the, the veil that you have up protecting you by having a corporation or an LLC or a partnership could easily come down if you're mixing bank accounts, if you're using personal checks to pay for things, if you're, you know, using the same address for multiple things, if you're paying yourself from your own account. So make sure everything is done uniformly, professionally, and on the up and up. And that would be my 3 things.

I always tell one of the things that I find sometimes I'll be talking to a business owner and I'll say, oh, we need to get a P&L and a balance sheet. And they'll be like, what, what are you talking about? I'm like, you know, day one, you need to get like QuickBooks in there or some other— Xero, whatever accounting software, you know, learn how to do bookkeeping or hire some kind of bookkeeping service. There's tons of them for a couple hundred bucks a month. They'll, you know, make sure your books are done.

Yeah.

So that because when you need money or you need to grow your business, it's super important that you have that. The same thing, legal paperwork. People are going to say, oh, well, where's your corporate papers? Or where is your operating agreements? Or, you know, whatever it is that they're asking for, or they need to get a contract from you or an NDA. I always discuss this, NDAs. My friend said NDA, NDAs are kind of worthless for the most part. What do you, what do you say about that?

They're overexposed and thrown around a lot. I mean, you know, there's, you know, the law protects legitimate trade secrets and legitimate, you know, proprietary information, which is like, you know, the formula for Coca-Cola. You know, the Colonel's 13 recipe, Colonel's 13 seasonings, you know, uh, special things and stuff like that, right? NDAs, they don't care about the fact that you're a pool company and they know whose pool you're servicing, or, you know, other crazy things that are publicly available or easily able to find out. Those really aren't subject to NDA protection. So yeah, NDAs are useful for protecting legitimate business information that deserves protection and doesn't deserve to be in the public eye. But people just throw around NDAs all the time for anything, and they're, you know, unless it's a legitimate business, uh, you know, private issue or secret or whatever you want to call it, or legitimate information, proprietary information, You know, you sign all the NDAs you want, they're not going to be valid for the most part for just things that are easily discoverable or easily figureoutable through not a lot of hard work.

Oh yeah, it's, it's, it's always interesting. Like, I'll have somebody come in, they're like, oh, I'm doing this, I have this whatever business I invented, right? And now they want me to sign an NDA. I just sign it. They go, you're not going to read it? I go, I don't really care. Like, you're going to show me something and you have to show it to me in order for me to advise you, right, on the proper thing. So let's just, you know, let's just get to it. And then sometimes I'll say, man, there's like tons of businesses that do the same exact thing that you do. I don't know what your special sauce is. That's what you're talking about. The special sauce is what's protected, nothing else.

No, it's true. And it's interesting because, you know, as an attorney, I get lots of, you know, potential clients or other attorneys who, you know, before they discuss, you sign an NDA, I've sent you an NDA, and I'm like, for what, man? First of all, the attorney-client privilege covers whatever you're going to tell me or show me. So I can't divulge your secrets to anyone else anyways. But I'm like, okay, whatever, just give me— I'll sign, I don't care. I'm just like you. I'm just like, whatever, whatever. And then, you know, other attorneys, like if they're, you know, they want to collaborate on a business project or something like that, they throw an NDA your way and I'm like, okay, whatever, I'll just sign it just to shut them up and move along. But, you know, like I said, unless it's a legitimate interest or whatever, they're, you know, if push comes to shove and something happens, it's not going to turn out the way that the people seeking to enforce the NDA want it to turn out.

So from a standpoint of like, where do you practice? So you practice only in Florida or other states also?

Sure. So I'm licensed in Florida, D.C., and New York, but the majority of what I do is in Florida, all throughout Florida, anywhere in Florida. But I have clients who are national and international too, but the majority of my practice is in Florida.

Okay. And if somebody has a— let's say they have a chargeback problem or a contract issue and they're, you know, in one of the places where you operate, because I haven't heard very many attorneys that handle chargebacks. So this is a great discussion of how to collect money, you know, when after you lose a chargeback. This is a great discussion and I'll be referring people to you.

Thank you.

You know, so how do people get in touch with you?

Just because you lose the chargeback doesn't mean it's over, right?

Yeah, it's not over. And if it's under a certain amount, you can try small claims court, right?

Yeah. Yeah.

So what's the— what's the best way for people to find you?

Sure. So, you know, I'm all over the internet. I'm very easy to find if you're looking for me. I'm not hiding. The best way is to go to finerolegal.com, which is my website. And it's got all my materials on it. It's got all my blogs, all my guest posts, all my white papers, all my videos, all my podcasts. It's got a lot of information. If you're a business owner, entrepreneur, startup, to answer a lot of information. If not just on there, you can email me or call me or message me on social media. I'm on every platform there is and be glad to assist anyone.

All right, sounds good. So looking for some legal help, fernerolegal.com. We'll post the link in the, uh, show notes, and also Matthew's, uh, LinkedIn, Instagram, Facebook, X, so you can get a hold of him and communicate with him. He's full of great information, and I appreciate you coming on the podcast today, and thank you for being a guest. Any Final parting words?

No, thanks for having me on. You know, just listen to what I said. If you have any questions, feel free to contact me and thanks for having me on.

All right. So carpe diem, everybody. Seize the day and peace out. Thank you for listening to B2B Vault, sponsored by Nationwide Payment Systems and NPS One, our smart invoicing platform.