Today's Guest

Margeaux Thomas is the founder of Thomas Law PLC law office located in Fairfax, Virginia. With more than 15 years of experience, she has skillfully represented individuals and small businesses in resolving a wide range of disputes through civil litigation and mediation. Margeaux boasts a strong educational foundation and currently serves on the Board of Directors of the Old Dominion Bar Association. She is also an active member of the Northern Virginia Black Attorney's Association, the Federal Bar Association, and a permanent member of the Fourth Circuit Judicial Conference. Working with an attorney can assist you in proactively managing your risk before falling in a situation where you’re searching for support with a legal dispute. Discover why it’s essential to consider working with an attorney before making a significant contractual commitment. Your relationship with your legal representative is important, so make sure to work with someone you trust and can effectively communicate with. 

Resources Shared

• Civil Attorney Fairfax VA | Fairfax Law Firm | Thomas Law PLC
• The Thomas Law Office, PLC: Overview | LinkedIn
• Margeaux Thomas | LinkedIn
• Thryv
  

Episode Transcript

(Please excuse grammatical errors due to transcription)

Gordon Henry:

Hey, hey, this is Gordon Henry at Winning on Main Street. Like it or not, just about everybody and certainly every small business owner needs a good lawyer, and today we have one with us, Margeaux Thomas. Margeaux is the founder of the Thomas Law Firm located in the greater Washington DC and Fairfax, Virginia areas. She's an expert in business formation, contract review, business partnership disputes, contract disputes, landlord tenant disputes, lots of disputes and civil litigation and mediation. What should you, our listeners, get out of this episode? As an entrepreneur or a small business owner, you need a good lawyer who understands your situation. You can learn a lot from Margeaux and you may even want to hire her firm.

We're excited to meet you, Margeaux. Let's dive in. First maybe just tell us a little bit about your background and how you got here.

Margeaux Thomas:

Thank you for having me. I'm really excited to be here and I've been practicing law for about 15 years. I started out at two relatively big regional law firms, but we've always been litigation. Back then I represented more banks that were being sued for just about everything under the sun, but it was a little different because my client was more so another attorney who I reported to inside the bank who made a lot of decisions about strategy. About seven years ago, I started my own firm and wanted to focus on representing small business owners in disputes that they face. Fortunately, it's an inevitable part of most small business lifecycle that you'll encounter or dispute with a client or a vendor or business partner and our goal was to provide options and support for small business owners that are going through that transition.

Gordon Henry:

What in particular attracted you to the small business space and small business law?

Margeaux Thomas:

I think that it found me to an extent. We did some small business work in addition to the banks when I came out of law school, and that's really where I kind of just fell into that. I got a job and they're like, "These are the cases you handle", and I just got a lot of experience with working on different types of disputes, but it was a lot of franchises at that point were going through and I really loved that aspect of my job and I really wanted to focus on that when I went out on my own.

Gordon Henry:

What are the typical legal disputes small businesses face?

Margeaux Thomas:

They are either disputes with, like I say, their clients, their vendors or their business partners. We handle a lot of lease disputes. Unfortunately, a lot of small business owners get presented with the lease and they're very excited about the process of opening their own business and it's an intimidating document that is very long and convoluted and difficult to read and a lot of people just sign on the dotted line without really understanding the obligations that that comes with. With COVID-19 and the economy, things change, it affects your business. It puts a lot of businesses in difficult situations with their property management company or landlords. We handle a lot of those type of disputes and workouts.

We handle a lot of bank financing issues. A lot of people get small business loans and go through transitions of their business that make it difficult to keep up with those payments. Large majority of our practice is devoted to business partnerships disputes, so it's usually family members or friends who go into business together and at some point realize that similar to a regular divorce, we call them business divorces, that it's just not working out for one reason or another. Then there's the run-of-the-mill contract dispute with the client who is unhappy or doesn't want to pay or that run-of-the-mill kind service industry client dispute.

Gordon Henry:

Before we get into the specific areas of disputes, I'm wondering if there's anything a small business owner can do sort of upfront that might help them deal with these disputes, which seem, from your words, sort of inevitable. Like it's going to happen, how do I prepare in advance so that I'm protected?

Margeaux Thomas:

I think that there's a mindset shift that I think needs to occur. I hear a lot of people say, "I hope I never need your services", and they view all attorneys that way. They're like, "Unless I'm in trouble, I really don't want to have to deal with an attorney." I don't think that's the mindset to go into this. I think a lot of people just think they're very pricey or they have negative connotations associated with attorneys. I think that a lot of the disputes that we have that can become make or break your business disputes could be resolved or significantly minimize the exposure and risk of those disputes by some pre-planning on the front end. What makes business disputes that we handle particularly difficult is the other party is usually somebody that our clients know and trust.

It's the last thing you think about when you're like, "I want to go into business with my husband or my friend" or somebody that you've known your whole life. You're not thinking, "Let me go hire an attorney to memorialize what our expectations are here." I think that that is just a mindset that needs to change a little bit on the front end because I don't think it needs to be seen as an adversarial issue or that you're expecting something to go bad. It just needs to be about managing risk like in any other aspect of your business.

Gordon Henry:

Everything you're saying resonates with me a little bit personally because early in my career I had a personal experience with a friend. In fact, the best friend who I went into business with when I was young, we had this business idea. I put in the sweat equity, I did all the work, he put in some money. I eventually felt I wanted to sell the business and move on in my career. He did not. He wanted to keep the thing going and we got in a big fight and parted ways. We actually kind of never talk to each other again. To avoid things like that, you've got to have a contract. We had a contract, but I don't know that we had the right contract. You seem to be saying be prepared in advance. I'm wondering, do you as the lawyer handle the contract for both parties? In my example, would you handle it for my friend and I or do you recommend each side has their own attorney?

Margeaux Thomas:

In a lot of situations, both parties come to us and we do an operating agreement, but I don't think the operating agreement really covers all the issues that need to be discussed when opening a business. I mean, it's going to cover what happens if you die or you get divorced or you get injured and you want to bring a partner in and things like that. But I think that there are conversations that need to be had about expectations and people will be in different phases of their life. Some people are nearing retirement, some people are entering the workforce. I mean, there's just a lot of things that I don't think that small business owners think about that could be pain points in the end or at some point in their business. A.

I think that when they come into our office, that's really what distinguishes us from the person who's just going to say, "Here's your ..." or if you went to Legal Zoom and you got your operating agreement, you think you're good. But given that we handle mostly disputes, we ask those questions like, "Okay, so you have a business already. Are you going to continue to run that business? Are you're going to be working full-time in this business?" You'd be surprised how many people are like, "Man, we didn't even think about that. We never even discussed that. We have different ideas about how that works, but we have never even thought to raise that."

I am certainly no therapist, but I think that there are some questions that can be asked and some expectations that can be discussed that can minimize a lot of disputes in the future. We try to do that with our clients when they come in and a lot of them do come in together and there's no conflict. We can certainly help with an operating agreement for those partners, but I think that there's more to it than just that agreement.

Gordon Henry:

I saw a blog post you wrote, "What to do when your business partner is stealing from you." Now I can't imagine you put in the operating agreement, "You should not steal from your partner." That's kind of pretty basic, so what do you do?

Margeaux Thomas:

A lot of times there are fiduciary obligations that are statutory base that prevent members of LLCs or business owners from doing certain things to each other. But from my personal experience, I think the biggest issue is there are some red flags that are going on and I think that business owners are very good at addressing problems and resolving disputes that have to do with their business. But it's a lot more difficult when it has to do with a business partner. A lot of those situations they end up ignoring or hoping that those red flags will go away and do not address the situation soon enough, and now they're in a situation where somebody has emptied the bank account or taken down the website or solicited all their clients to some new business they set up across the street.

I think that my biggest advice there is to ... this doesn't just happen overnight. You don't wake up and somebody's stolen all the money out of your business, especially when it's a friend or family member. This is something that has been brewing for some time and my advice there is this is not a stick your head in the sand type of situation. Just like a regular divorce, if you have communication cycles that are negative, it's not going to resolve itself by ignoring the situation.

Gordon Henry:

You mentioned people were afraid, "Well, attorney costs so much, I don't want to spend the money until I have a problem", so let's just get it out there. What does it cost to work with a Thomas law firm? If I'm a small business owner and I want to set up the type of agreement you're talking about, maybe an operating agreement, is it an hourly fee?

Margeaux Thomas:

I'm very opposed to billable hours. I have a platform where I'm just ... I just don't think it's the most efficient way. I don't think it incentivizes lawyers to do work in a way that is helpful to their clients. I agree that attorneys just like accountants and bankers are trusted advisors. I think that a lot of times business owners who are in disputes don't pick up the phone because they're afraid of the bill that they're going to get at the end of the month and have no idea how ... the longer they talk to the attorney about the problem, the more they're going to have to pay. I think that that is just at odds with the help that people need and I think it's counterproductive. We try to encourage people or promote subscription agreements so that people are not thinking about a meter running when they're picking up the phone.

I think it's a long-term relationship. There are a number of ups and downs and transactions and employees coming in and buying of property and independent contractors. I mean, I could just run the gamut of things that are legal issues that business owners face and that's why we try to view it as a long-term investment that isn't ... you may not call us this month, but next month you may have a huge transaction and want to bring in a significant investor. Our compensation is usually subscription based and it's based upon the number of employees. We understand that when you start out and have one employee, it's not the same as when you're five years in and have 25 people.

We try to structure that based upon the growth and scale of your business. The bigger you get, the better it is for us, so we're all in the same boat together. It's not like we get paid more money for spending more time on your work. We don't think that's the most productive model. We try to look at it a little bit differently. I just don't think that billable hours and calling when you need something and it's really too late or much more expensive is really the model that benefits.

Gordon Henry:

It's very interesting. So subscription. Is it an annual subscription? How does it work?

Margeaux Thomas:

It is a monthly subscription.

Gordon Henry:

Monthly.

Margeaux Thomas:

Like I said, it's based upon the number of employees that you have and it starts out lower when you're a startup and just depends on how you want to scale your business and how we can help you do that.

Gordon Henry:

Now you also work on landlord tenant disputes, I see. Is your client there typically the landlord or is it typically the tenant?

Margeaux Thomas:

It's usually the tenant, the small business owner.

Gordon Henry:

Oh, it's the small business owner who has a landlord. I remember during COVID there were ... it was a lot that happened during COVID. One of the things was landlords couldn't kick out tenants who didn't pay. Right. Was that something you were aware of where companies maybe a small business had a business disruption and they said, "Hey, we can't pay." How did you deal with those situations, since so many small businesses face problems, particularly retailers?

Margeaux Thomas:

Unfortunately commercial landlord tenant law is not as friendly as residential is. We had a lot of situations where residential tenants could not be evicted for significant amount of time because of COVID. Commercial businesses did not get the same leeway. I mean, there were short periods of time where everything was shut down, but commercial leases have acceleration clauses, which means if you default, they can accelerate the entire remaining balance due on the lease and you're forced with that. We had a lot of litigation over force majeure clauses and whether this was something that was unpredictable that prevented the parties from performing, but at the end of the day, I think that a lot of courts sided with the landlords and those types of issues, and it created a lot of tension for tenants who were behind because of circumstances that they couldn't control.

Gordon Henry:

Now, you've also written about the commercial lease agreements are usually written for the benefit of the landlord because usually it's the landlord who's handing that contract over to the small business tenant. What should the small business owner look out for?

Margeaux Thomas:

The two biggest things that we advise people to look for, one, personal guarantee. If there is any way that you can pay more or restructure your lease, do not sign a personal guarantee. You're in a much better position. You do not want your personal finances to go down with the business. Small businesses fail every single day and you don't want to be tied to that obligation. There are a lot of small business owners who will not sign a lease that has a personal guarantee attached to it and that's really, I think, the best way to look at it. A lot of people who don't have leases reviewed, they don't even think about that and they are in personal guarantees for a five, 10 year lease. I mean, it's not the same as a residential lease. The term is substantially longer. There's a lot more at risk and to be tied to that personally is a huge ... it's just significantly detrimental to a small business owner if your business does not materialize the way that you want it to.

The second thing is what responsibilities you have for the business. A lot of leases will start with tenants who are solely responsible for the HVAC and the roof and the parking lot, all types of things that you don't know what the condition of HVAC is when it got put in. If the summer rolls around and your HVAC doesn't work, that is not the same as your house HVAC not working. It's significantly more expensive and to go into that and sign on the dotted line without even knowing what the condition of the HVAC is is a huge mistake that we see a lot of business owners do.

Gordon Henry:

Interesting. Because typically with a house purchase, most of us know you got to do a full-blown inspection. You're very careful about are there mice, that kind of stuff. Everybody looks at the basement. Probably when you're leasing a place for your business, you're not thinking of it in the same way.

Margeaux Thomas:

Most people don't do inspection and they don't think about that and they take on responsibility for things like the roof. That's something that would certainly be in a home inspection. They're going to look at the HVAC, they're going to look at the roof. I mean, they're going to evaluate those things. But in a commercial lease, people take on responsibility for those things with no inspection and no idea how long this is going to cost, and the cost of replacing a HVAC and a commercial building is three, four, five times as much as it would be in your house.

Gordon Henry:

Interesting. Now, you also work on business formation and contract review. What are a couple of tips for small business owners regarding contracts when they're forming the business? For example, you can incorporate, you can do an LLC, you can do a partnership. Do you advise people on those kinds of things, like what kind of structure you need?

Margeaux Thomas:

Yes. We work with people's accountants to think about the tax consequences and the best structure for the business based upon the individual's needs all the time.

Gordon Henry:

Right. The answer is it depends, I guess, on what kind of business you have in terms of what type of structure you need?

Margeaux Thomas:

Yeah, I mean, there's some people who come and say, "We want to bring in investors immediately", or "We want this business to go public at some point." There are other people who are mom and pop shops that want to open a bakery on the corner and are not investing and it's more sweat equity and there's a low cost of entry. I mean, there's other people who want to buy a franchise. I mean, the people are in lots of different financial and they have different expectations about where they see this business going and I think that those are really important considerations for the entity's structure. But no matter what entity they choose, I mean there's certainly some guidelines that they certainly should be following to protect that entity, like separating your personal finances from the business finances.

You certainly don't want to be in a position where people are trying to pierce the corporate veil to go after your personal assets because you haven't kept those corporate formalities. We talk about that with our clients about setting up and making sure people aren't writing checks to you individually and you're not putting your personal bills through that account, which a lot of small business owners do without even thinking about it. Maybe it's just a lack of know better, do better. They're just not aware of how to operate that.

Gordon Henry:

What's your view on arbitration and mediation? Is that something small business owners should agree to if that's proposed to them as opposed to some other form of getting involved in a lawsuit, I guess?

Margeaux Thomas:

We write mediation clauses into most of our agreements. Our operating agreement, we select the mediation company, we put that in there. There's no ambiguity about how a dispute arises, how that will be dealt with because that's one of the things that you don't want to be arguing about when you are in a dispute, how we're going to resolve this dispute. We don't want there to be any ambiguity in the business because that can be a whole nother motions and decisions about how to resolve the dispute. We don't want that to be on the table. We're a huge proponent of mediation. I think mediation is a great way to somewhat informally resolve disputes. Sometimes just having a neutral third party and being in a space where someone can listen and you can feel heard and you can voice your concerns, can get you a better outcome than going to court where somebody is going to enforce the resolution on you.

We do a lot of mediations and we tend to put mediation requirements like condition precedence in most of our agreements for that reason. I'm not a big fan of arbitration. We do a fair amount of arbitration, but I don't think that that platform or structure is the most advantageous to small businesses for numerous reasons. The most important ones is cost.

Gordon Henry:

Interesting. So yes, mediation, no arbitration, I'm not sure most people know the difference, including me. Can you explain?

Margeaux Thomas:

Mediation is a voluntary process. The parties have to agree. It only works if they're in good faith and there's a neutral third party, but they cannot say, "You must take this deal." They make a suggestion at times, they put on an evaluative hat, but mostly they're a facilitator that helps the parties come to a joint resolution that both parties can work with and then that is memorialized and becomes binding. But the person, it's usually require a judge in those circumstances, mediations [inaudible 00:22:20], does not have any power to force you to make a decision or go a certain way. Arbitration, it's somewhat like court, but you pay for it. You're paying for the decision maker and that decision maker makes the decision that you are bound by. But there are a lot of ... there is AAA and Jams have a whole administrative structure that you have to pay for.

There's an administrator, you're going to pay for the arbitrator, they're between $500-$700 an hour. There's just a lot of costs and there's filing fees associated with that that are based upon the amount. If you go to court, our office is in Fairfax. I mean, it's not based upon whether you're filing a million dollar dispute or a $30,000 dispute, it's like a couple hundred dollars. In arbitration, it can be thousands of dollars of filing fees based upon the amount in dispute and the process can take a lot longer. I mean, there's a lot of disadvantages in my opinion for small business owners to have to resolve their disputes and arbitration, but we see a lot of contracts that have arbitration clauses because in my opinion, a lot of people who write those don't do arbitration and they don't understand what effect that has on a small business owner who has to go through an arbitration. It's just the standard clause that people throw into contracts thinking that that's the best outcome.

Gordon Henry:

Super helpful. Now, you're a small business owner yourself, it's called Thomas Law Firm, in addition to being a lawyer, helping small businesses. What do you find to be the most challenging thing for you about running a small business?

Margeaux Thomas:

I don't want to say that staffing is like my Achilles heel or my Everest. It is hard. I think it's easy to sell the thing that you're passionate about, but then to bring on people who have the passion that you have is a difficult transition when you're trying to scale your business. It's a hard market. People have a lot of interest and they change. Just finding a team that really believes in the purpose of what you're trying to build I think is a really difficult part of trying to scale a business. I think I'm very lucky to be surrounded by a lot of great people, but finding new people and growing is a constant challenge for me, and I know a lot of other people as well.

Gordon Henry:

We talk to small businesses all the time, and that is usually the number one issue they bring up, is finding good people and retaining them as well. We're going to take a quick break, hear a word from our sponsor. We'll be back in just 30 seconds with Margeaux Thomas. Don't go anywhere.

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Gordon Henry:

We're back with Margeaux Thomas of the Thomas Law Office, and we wanted to zone in here on if one of our listeners is interested in getting in touch with you, what should they do? What if someone has a problem and wants to speak to you before hiring you? Is there a way to get a consultation or is there a cost for that? Can you explain how new clients get involved?

Margeaux Thomas:

They can reach out to our office, they can call 703-957-2577, or they can go to our website, thomaslawplc.com, and there's an intake form that they can fill out. They can talk to our wonderful intake coordinator, Benevolent, who handles so much for us and is always a pleasant person on the other side of the conversation. That is how the process has started. We schedule everybody for an initial consult because we want to evaluate whether it is a good fit for our firm and also for you to evaluate whether we're a good fit for you. We think it needs to be mutual. There's a consultation fee of $400.A lot of time is spent before that consultation ... because we only handle small business issues, there are a lot of documents that go into business disputes. It's usually not so much a he said, she said, there are bank records or contracts or agreements or lawsuits or other things that need to be reviewed and we think that coming into the consult prepared and having reviewed that information is much more beneficial than speaking to people before we ...

A lot is going to be relying on what those documents say and the laws that apply to those, so we do a lot of analysis on the front end and then go into the consultation and discuss our analysis, our projection, the cost, the time, the outcome, the decisions that need to be made. I think the consultations are a little bit different than maybe other people have at other firms where it's more like feeling out what's going on. We do a lot of intake. We ask a lot of questions before that meeting so that we can make it as productive as possible.

Gordon Henry:

I know you have a family because you've written a couple of posts, social media posts, about your kids. How do you manage being a busy working person, leading a law firm with your name on the door and managing your family responsibilities?

Margeaux Thomas:

I think that is the most difficult part of this. I don't call it balance. People say work-life balance. I'm like, "I don't ever feel like it's balanced." I think that it's either a lot of work or sometimes it's more family. I don't know if it's ever even, but I think that having a big support system has made it possible for me. My husband was a big proponent in me starting this business and has been very encouraging along the way, and I'm sure I could not be here without him. My kids have been wonderful and are little entrepreneurs themselves, so it's interesting seeing that development. Just in my office, I like to work with people that are really committed and share the same core values that I do and I have been lucky enough to be blessed with some amazing staff along the years. A lot of people have went to law school. A lot of our law clerks are now in law school. It's good to just be surrounded by people who are really passionate about what they do because I'm passionate about what I do.

Gordon Henry:

Just final question, what's next for the Thomas Law Office? Do you see yourself just continuing as you're doing? Do you want to grow more, hiring more people, perhaps going to other states or locations? What's going to come next?

Margeaux Thomas:

I like serving the DMV, I like this area. It is very entrepreneurial focused, so I think that we're in the right place. I just want to grow our subscription services. I'd like to see billable hours die. I'm just not a huge proponent of them. I'd like to increase our platform about subscription agreements and how they can be beneficial to small business owners. I think that's really what sets us apart from a lot of firms and expand our offerings to small business owners through that model.

Gordon Henry:

Terrific. Well, Margeaux, I really want to thank you for coming on the show. It's been great speaking with you, and I hope a few of our listeners will consider speaking with you about their needs.

Margeaux Thomas:

Wonderful. Thank you for having me.

Gordon Henry:

I want to thank our producer, Tim Alleman and our coordinators Diette Barnett and Daniel Huddleston, and if you enjoyed this podcast, please tell your colleagues, friends and family to subscribe and please leave us a five star review. We'd really appreciate it, it helps us in the rankings. Small business runs better on Thryv. Get a free demo at thryv.com/pod and check out our new free product command center at thryv.com. Until next time, make it a great week.

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