Taxes and Business Law - No B.S. Legal Solutions for Your Business

Welcome back to "No B.S. Legal Solutions," where we break down essential aspects of business law to help you navigate the entrepreneurial landscape. This blog tackles a topic affecting every business owner: taxes.

Why Taxes Matter for Your Business

Taxes are like a part of life; they are inevitable. But when it comes to your business, understanding tax implications can be a game-changer. Here is why:

                          Financial Health: Paying taxes properly ensures your business stays healthy and avoids costly penalties.

                          Compliance: Staying on the right side of tax laws keeps you from trouble with the tax authorities.

                          Planning: Smart tax planning can save money and help your business grow.

Types of Taxes for Businesses

Businesses deal with several types of taxes. The main ones are:

                          Income Tax: You pay taxes on your business's profits. The rate depends on your business structure.

                          Sales Tax: If you sell products or services, you might need to collect sales tax from customers and remit it to the government.

                          Payroll Tax: If you have employees, you will withhold their income tax and pay your share of payroll taxes.

                          Property Tax: You will pay property taxes if you own a business.

Tax Deductions and Credits

The good news is that the tax code also offers deductions and credits that can lower your tax bill. Common deductions and credits include:

•    Business expenses: Money spent on running your business, like rent, supplies, and advertising, can often be deducted.

•    Depreciation: You can deduct the cost of certain business assets over time.

•    Research and development credits: If your business conducts research and development, you might be eligible for tax credits.

Record-Keeping Is Key

Proper record-keeping is crucial for tax purposes. Keep track of all your income, expenses, and receipts. Good records help you pay the correct taxes and make audits less stressful.

Getting Professional Help

Taxes can get complex, and tax laws change. Consider hiring an accountant or tax professional to ensure you make the most of deductions and credits while staying compliant.

No B.S. Thought

Taxes are a part of the business journey, but they do not have to be a headache. Understanding your tax obligations, keeping accurate records, and seeking professional guidance can help you navigate the tax landscape confidently.

The following blog will explore another vital aspect of business law. Until then, keep those financial records organized and your business thriving!

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Employment Law Essentials - No B.S. Legal Solutions for Your Business

Welcome back to the "No B.S. Legal Solutions" series! Today, we are diving into a topic that affects every business with employees: employment law. Understanding the basics of employment law can help you build a positive work environment and avoid legal headaches.

Hiring and the Employment Contract

When you bring someone into your business, it is crucial to have an explicit employment contract. This contract outlines the terms of employment, including:

•    Job Duties

•    Salary or wages

•    Work hours

•    Benefits

•    Termination procedures

Having a well-written contract helps prevent misunderstandings and disputes later.

At-Will Employment vs. Contract Employment

In the United States, most employment is considered "at-will." This means that the employer or the employee can terminate the employment relationship at any time, for any reason (with some exceptions).

That said, you can also have contract employment, where the terms of work are specified in a written agreement. This can provide greater job security but also means both parties are bound under the contract.

Anti-Discrimination Laws

Employment law includes anti-discrimination laws designed to ensure fair treatment of employees. These laws prohibit discrimination based on the following:

•    Race

•    Color

•    Religion

•    Sex

•    National origin

•    Age

•    Disability

•    Pregnancy status

Treating all employees equally and providing reasonable accommodations if needed is essential.

Wage and Hour Laws

Wage and hour laws dictate how much you must pay your employees and set standards for working hours. Key points include:

•    Minimum wage: The lowest amount you can pay employees.

•    Overtime: Rules for paying extra when employees work more than 40 hours per week.

•    Breaks: Regulations on rest and meal breaks.

Workplace Safety

Ensuring a safe work environment is another crucial aspect of employment law. This includes providing a workplace free from hazards, offering training on safety protocols, and having procedures for reporting accidents.

Family and Medical Leave

Under the Family and Medical Leave Act (FMLA), eligible employees can take up to 12 weeks of unpaid leave for specific family or medical reasons without losing their job. Employers must maintain health benefits during this leave.

No B.S. Thought

Employment law is about maintaining fair and respectful relationships with your employees while adhering to legal requirements. Ignoring these laws can result in costly disputes and damage your business's reputation.

The following blog will explore another vital aspect of business law. Until then, remember that treating your employees well and understanding employment law is critical to a prosperous and harmonious workplace.

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Intellectual Property Protection - No B.S. Legal Solutions for Your Business

Welcome back to the "No B.S. Legal Solutions" series, where we cut through the legal jargon to give you practical insights. Today, we are diving into a crucial topic for any business: intellectual property protection.

What's Intellectual Property (IP)?

Think of intellectual property as what sets your business apart from the rest. It includes your unique ideas, creations, and inventions. There are three main types of IP you need to know about:

                          Trademarks: These protect your brand, like logos, business names, and slogans.

                          Copyrights: They cover creative works like books, music, software, and even website content.

                          Patents: These safeguard new inventions or processes you have developed.

Why Protect Your IP?

Imagine you create an awesome logo or a catchy jingle for your business. Without protection, someone else could copy it, and you would lose your unique identity. That is where IP protection comes in – it gives you the legal rights to your creations.

How to Protect Your IP

                          Trademark Your Brand: Register your business name, logo, and slogan with the right government agency. This helps prevent others from using similar names or logos.

                          Copyright Your Content: If you create original content like blog posts, graphics, or videos, consider copyrighting them. It is automatic when you create the work, but registering with the U.S. Copyright Office adds an extra layer of protection.

            Patent Your Inventions: Consider applying for a patent if you invent something unique, like a new gadget or process. It can take some time and money, but it is worth it for the protection it offers.

Avoiding IP Disputes

IP disputes can get messy and expensive. To avoid them:

•    Do Your Research: Before choosing a business name or logo, check if someone else has registered something similar.

•    Use Contracts: When hiring freelancers or employees, include clauses stating that the work they create for your business belongs to you.

•    Monitor Your IP: Keep an eye on your trademarks and copyrights. If you spot someone infringing on your IP, act.

No B.S. Thought

Remember, your intellectual property is valuable, and protecting it is wise for your business. It ensures that your hard work and creativity stay yours. The following blog will delve into another essential aspect of business law. Until then, keep those ideas flowing and your IP protected.

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Navigating Contracts and Agreements - No B.S. Legal Solutions for Your Business

Welcome back to "No B.S. Legal Solutions," where we are all about giving you the scoop on business law. In this blog, we dive into a topic every businessperson will encounter: contracts and agreements. They might sound intimidating, but we are here to clarify them.

Contracts: The Building Blocks of Business

Think of contracts as the rules of the game in the business world. They spell out who does what, when, and how. Whether partnering with a supplier, hiring employees, or selling your products, contracts are the glue that holds it all together.

Creating Contracts That Work

Here are some key things to keep in mind when dealing with contracts:

                          Clarity Is King: Write contracts in plain English, not legalese. Everyone involved should understand what is expected.

                          Include All the Details: Don't leave anything to chance. Define the terms, responsibilities, payment terms, and deadlines.

                          Negotiation Matters: It is okay to haggle a bit. Do not be afraid to negotiate terms that benefit your business.

                          Review Before You Sign: Don't rush into anything. Take the time to read and understand every word. If you are unsure, seek legal advice.

                          Keep Copies: Always keep a copy of the signed contract. It is your proof if things go south.

Common Types of Contracts

Here are some common types of contracts you might encounter:

•    Employment Contracts: Used when hiring employees. They outline job duties, compensation, and benefits.

•    Sales Contracts: When selling goods or services, these agreements define what is being sold, when, and for how much.

•    Partnership Agreements: If you are teaming up with others, this agreement spells out everyone's roles, responsibilities, and profits.

•    Nondisclosure Agreements (NDAs): These keep your trade secrets and sensitive information safe when sharing them with others.

Watch Out for Pitfalls

While contracts protect you, they can also trip you up if not handled correctly:

•    Oral Agreements: Sometimes, people rely on handshakes or spoken agreements. These can be risky. Always get it in writing.

•    Vague Language: Ambiguity in contracts can lead to disputes. Be precise.

•    Not Reading the Fine Print: Never sign a contract without reading it thoroughly. If it is too complex, get help understanding it.

No B.S. Thought

Contracts and agreements are the backbone of any successful business. They are there to protect your interests and ensure everyone plays by the rules. Remember, contracts should simplify your business relationships, not complicate them.

The following blog will explore another critical aspect of business law. Until then, keep those contracts clear and your business running smoothly!

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Choosing the Right Business Structure - No B.S. Legal Solutions for Your Business

Welcome back to the "No B.S. Legal Solutions" series! In this blog, we are tackling one of the first and most crucial decisions you will make as an entrepreneur: choosing the proper business structure. Think of it as the foundation of your business – get it right, and you are off to a great start.

Why Does Business Structure Matter?

So, what is the big deal with business structure? It affects everything from paying taxes to sharing responsibilities with partners and even how you protect your personal assets. Let us break it down:

                          Sole Proprietorship: This is like going solo. You run the show but are also personally responsible for debts or legal troubles. It is simple but risky.

            Corporation: Think of it as a separate entity. It is complex to set up but can protect your personal assets and attract investors. There are different corporations, like C-corps and S-corps, each with its own benefits.

            Limited Liability Company (LLC): An LLC offers a middle ground. It combines the simplicity of a sole proprietorship with liability protection. Your personal assets are safe if things go south.

                          Partnership: If you are starting a business with someone else, this could be your choice. But remember, partners share profits and responsibilities, and you are liable for the business's debts.

How to Choose the Right One

So, how do you pick the perfect structure for your business? Start by asking these questions:

•    What's Your Risk Tolerance? Are you comfortable with personal liability or want to protect your assets?

•    How Many People Are Involved? Are you a solo act or partnering up?

•    Tax Considerations: Each structure has different tax implications. Think about how you want to handle taxes.

•    Long-Term Goals: Where do you see your business in the future? Some structures are better suited for growth and raising capital.

•    Paperwork and Regulations: Consider the administrative work involved. Some structures require more paperwork and formalities than others.

No B.S. Thought

Remember, there's no one-size-fits-all answer. What works for a tech startup might be different for a family-owned bakery. Take time, research, and consult a business attorney or accountant.

Choosing the proper business structure is a big step on your entrepreneurial journey and sets the stage for everything that follows. Next time, we will dive into another critical aspect of business law. Until then, keep dreaming big and making those business plans!

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

No B.S. Legal Solutions for Your Small Business

Hey there, future business leaders and entrepreneurs! Welcome to our blog series, "No B.S. Legal Solutions." Sure, that might make you think, this is B.S. Well, you are right. The Skeen Firm principal, Brocton Skeen, believes in Main Street business and simplifying complex legal issues so those business owners can better serve their communities. If running your business efficiently and legally is essential to you (it should be), you are in the right place if you want to dive into the business world and make your entrepreneurial dreams a reality.

We get it – business law can seem like a maze of complicated rules, regulations, and legal jargon. But fear not! This series is here to break it all down for you without the confusing stuff. We will give it to you straight, in simple terms, you can understand.

So why is understanding business law so important? Well, it is like having a secret weapon in your entrepreneurial toolkit. When you grasp the basics of business law, you can protect your company, make smart decisions, and avoid costly mistakes. In short, it is the key to running a successful and sustainable business.

Throughout this series, we will cover everything from choosing the proper business structure to handling contracts, taxes, and even those tricky ethical dilemmas. We will empower you with practical advice and insights you can immediately implement.

No more beating around the bush or feeling overwhelmed by legalese – we are here to give you the no-nonsense, no-B.S. solutions you need to thrive in the business world.

So, grab your notepad, get comfortable, and let us start this journey together. By the end of this series, you will know more about the legal aspects of business and be well-equipped to navigate the entrepreneurial landscape confidently.

Ready? Let us dive in!

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Protect Your ASS-ets

So, you filed a Certificate of Organization for your LLC.  Great!  Your work has just begun!

As an entrepreneur or small business owner, you have the drive and ambition to turn your dreams into reality.  But before diving headfirst into the business world, it is crucial to understand the importance of entity formation.  This article highlights the true value of forming a legal entity for your business and how it can safeguard your assets and propel you toward long-term success.

Why Entity Formation Matters

Protecting Your Assets: Forming a legal entity such as an LLC is essential to shield your personal assets from business liabilities.  With the right entity and by adhering to corporate formalities, you can say goodbye to sleepless nights worrying about losing everything in case of a lawsuit or financial downturn.

Building Credibility:  Establishing a formal business entity adds credibility and professionalism to your brand.  Gain the trust of clients, partners, and investors who value a structured and legally compliant organization.

Tax Benefits and Flexibility:  Forming a business does provide potential tax advantages and flexibility.  Working with your accountant to optimize your tax strategy, maximize deductions, and navigate the ever-changing tax landscape more effectively is important.

The Road to LLC Formation

Choosing the Right Entity:  While various business entity options exist, our current focus is on the most flexible option for most business owners, the Limited Liability Company (LLC).  Understand the unique benefits and characteristics that make the LLC a popular choice for entrepreneurs and small business owners.

Filing Made Easy:  It is easy to file formation documents online. Most states offer same-day or quicker service.

Professional Assistance:  Filing is just the start, though. For more information, click here.

True Protection Beyond Filing

Maintaining Compliance:  You must keep your business in good standing to preserve the protections offered by your legal entity. To do so, you must keep a minimum level of compliance, such as having regular meetings, having meeting minutes, filing all necessary tax documents, and having adequate insurance coverage.

Contracts and Agreements:  Using well-drafted contracts and agreements will solidify relationships with clients, suppliers, and partners.  While the entity you select protects your personal assets, your contracts protect your business entity. The best part is that contracts protect your customers, too, because they set out the terms of your deal and potential remedies if a breach occurs.

By forming a legal entity such as an LLC, you can protect your assets, enhance your credibility, and optimize your tax strategy.

Remember, true protection goes beyond filing paperwork – it involves ongoing compliance and safeguarding your intellectual property.  Start building a solid foundation for your business today and pave the way for a prosperous and secure future.

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Succession Planning - The Most Important Business Plan a Small Business Owner Can Make

As a small business owner, you put your heart and soul into building your company.  But what happens when it’s time to move on?  Whether you are retiring, selling, or passing the business on to your children, you need a plan.  That’s where succession and estate planning meet.

Succession and estate planning aren’t just for wealthy individuals.  They are for business owners who want to ensure the distribution of their assets according to their wishes.  If you are a small business owner, your business will likely be one of your most valuable assets.  Without a plan, your business might end up in probate court for months or years, costing your family time, money, and stress.

That is why it’s crucial to start thinking about your exit strategy now.

The following steps are a good start to your succession plan:

Know Your Options: You must know your options before creating an exit strategy. Will you sell the business outright?  Will you pass it on to your children?  Will you continue to play a role in the company even after you retire?  Understanding your options will help you decide what’s best for you and your family.

Plan Early:  The earlier you start planning, the better.  This gives you time to explore your options and make informed decisions.  It also gives you time to build up the value of your business, which can increase the amount you receive if you decide to sell.

Get Professional Help:  Succession and estate planning can be complicated, especially when a small business is involved.  Working with an experienced attorney who can help you navigate the process is essential.  They can help you understand the legal implications of different options and create a plan that meets your specific needs.

Communicate With Your Family:  Succession and estate planning is not just about you – it’s also about your family.  Make sure you communicate your plans with them and involve them in the decision-making process.  Keeping everyone engaged can encourage cooperation and prevent potential conflicts.

Review and Update Your Plan:  Succession and estate planning is not a one-time event.  You must review and update your plan regularly to meet your needs.  This is especially important if your business or personal situations change.

Please do not wait until it’s too late to start thinking about your exit strategy!  With the right plan, you can ensure your business thrives long after you are gone.  So take the first step today and start planning for your future.

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Understanding Shareholder Agreements: An Introductory Guide for Business Owners

When an entrepreneur establishes a company, they often focus on the excitement of their new venture and the growth potential.  That said, it is equally important to consider the legal aspects that govern shareholder relationships and responsibilities.  A shareholder agreement is a crucial document that outlines the rights, obligations, and protections of all parties involved in a corporation.  This blog post will provide an introductory overview of shareholder agreements, their key elements, and why they are essential for business success.

What is a Shareholder Agreement?

A shareholder agreement is a legally binding contract entered into by the shareholders of a corporation.  It serves as a blueprint for governing various aspects of the business, including the rights and responsibilities of shareholders, dispute resolution mechanisms, decision-making processes, and protecting shareholder interests.  A business lawyer often drafts and customizes this agreement to meet the company’s and its shareholders’ unique needs and circumstances.

Critical Elements of a Shareholder Agreement

Shareholder Rights and Obligations:  A shareholder agreement defines the rights and obligations of each shareholder, such as voting rights, access to financial information, participation in decision-making processes, and restrictions on share transfers.

Decision-Making Processes:  The agreement outlines the procedures for making major business decisions, including appointing directors, issuing new shares, or selling the company.  It may also establish thresholds for decision-making and mechanisms for resolving deadlocks.

Dispute Resolution Mechanisms:  To minimize conflicts, shareholder agreements often include dispute resolution mechanisms, such as mediation or arbitration, to help resolve disagreements between shareholders amicably and efficiently.

Share Transfer Restrictions:  Shareholder agreements commonly include provisions to restrict the transfer of shares.  These restrictions can help maintain stability and prevent unwanted third-party involvement by allowing existing shareholders the right of first refusal or imposing pre-approval requirements for share transfers.

Confidentiality and Noncompete Clauses:  To protect sensitive company information and trade secrets, shareholder agreements often include confidentiality and noncompete clauses prohibiting shareholders from disclosing confidential information or competing with the business during and after their involvement with the company.

Why are Shareholder Agreements important?

Protection of Shareholder Interests:  A well-drafted shareholder agreement safeguards the interests of shareholders by outlining their rights, obligations, and protections, thus ensuring fairness and preventing potential disputes or misunderstandings.

Control and Decision-Making:  By establishing transparent decision-making processes, shareholder agreements provide a framework for efficient and effective corporate governance, allowing shareholders to have a say in important matters and avoid conflicts.

Conflict Resolution:  Disputes among shareholders can disrupt business operations and jeopardize the company’s success.  A shareholder agreement with well-defined dispute resolution mechanisms can help address conflicts promptly and maintain a harmonious working relationship.

Shareholder Exit Strategy:  Shareholder agreements often include provisions to address scenarios such as a shareholder’s voluntary or involuntary departure.  These provisions can define the process for the sale or transfer of shares, ensuring a smooth transition and minimizing potential disruptions to the business.

In the complex world of corporate governance, shareholder agreements are vital for protecting the interests of all parties involved in a company. By defining rights, obligations, decision-making processes, and dispute resolution mechanisms, these agreements contribute to a stable and prosperous business environment. As a business owner, it is crucial to consult a knowledgeable business lawyer who can help you draft a shareholder agreement tailored to your specific needs and ensure legal compliance. Remember, a well-drafted shareholder agreement can help safeguard your com

 *Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

5 Years and Counting – 5 Lessons Learned From Running a Business

Before diving into any lessons learned from running a business—a law firm—for the last five years, I would like to thank everyone who has supported me. I especially want to thank everyone who said I was crazy or weird or told me I could not do something. Both fueled the mission to provide Everyday Legal Advice in their unique way. And for five years, I have, in my own crazy and unique ways, pursued with purpose the vision of providing easy-to-use legal advice for clients facing challenging situations in an increasingly complex world.

Here are some lessons that fostered my business and professional growth over the last five years.

1.     Thrash in the Tide – Life is full of rules, and laws, that we all must follow. That does not mean you must follow the herd and conform to every norm. Just because a profession has always done things, a certain way does not mean everyone should continue doing it that way. Designing a place I, and hopefully countless others, want to work has felt like swimming headfirst into a hurricane-fueled tide. After a while, the drive to do it differently becomes something you enjoy, and that headfirst swim becomes fun. So spend a lifetime building what you want by thrashing in the tide while others watch in amazement.

2.     Be Unapologetically You – Oscar Wilde famously said, “Be yourself; everyone else is already taken.” He was onto something. We each bring something unique to the table. And in business, the most important thing you can do is to make it to the table. After you make it, use your access wisely and push for something you believe in.

3.     Enjoy the Rollercoaster – The first thing you realize when you start a business is that you have unlimited freedom to set your own schedule and work the hours you want. The second thing you realize is that business ownership is the wildest rollercoaster you will ever ride. Sure, the ride starts slowly, but suddenly you land your first client and find yourself at the highest high. An immediate setback often follows this high, and that fall from the high is terrifying and swift. Wash, rinse, and repeat daily, monthly, and yearly. As the ride continues, the distance between the highs and lows dissipates, and the emotions moderate. Lean into it! Throw your hands up and enjoy the ride.

4.     Action Bias – Just get after it! Want to start a business, do it. Start a new hobby, great. Stop thinking about doing a thing and get after doing it. When I started five years ago, I set out to make the best business plan ever. I would design a plan, then revise it, only to revise it again. Looking back, I would have made more progress in year one if I had just gotten after it. The wonderful thing is that if you keep going, you get to act more and continue to grow. What will you do to pursue your hobby, passions, or dreams today?

5.     Be too Stupid to Quit – Someone once asked me what I thought the secret to running a business was. My response surprised them: “I’m too stupid to quit.” Trust me, there were plenty of times I wanted to quit, that I thought I could not run a business, that I would never make it. But with each day and each small win, I kept going. Lucky for us, everyone has this ability because if I can do it, anyone can do it. Keep pushing; it is all worth it!

So, to everyone reading, thank you for five great years. One thing is certain, I am not the same person, and the firm is different from the entity it was five years ago or even one year ago. I look forward to learning more and growing

Hold Up! How Holding Companies Benefit Small to Midsize Business Owners

That Warren Buffett fellow is really onto something, and that’s not even considering his inclusion on the Forbes 400.  So, what exactly is he onto?  Glad you asked!  His company, Berkshire Hathaway Inc., is the gold standard of a holding company (holdco).  Hold up, what was that term?  A holdco, sometimes known as a parent company, is an entity that owns investments in the form of stocks, bonds, other companies (operating companies/opco), or anything of value.  With the definitions out of the way, we can move on to how a holdco can help SMB owners.

As we have said in earlier articles, outside of generating a profit, the key purpose of any corporate entity is asset protection for its owners.  (Click Here and Here)  But how many entrepreneurs get other ideas to increase their revenues, which might not match their current business?  That answer is unsurprisingly a lot.  So, what happens if you run two opposite businesses through one entity?  That’s right – increased liability exposure.

What’s the best way to deal with liability as a business owner/operator?  You guessed it – a properly structured corporate entity.  This is where a holdco comes into play.  Imagine one business owner running a car wash plus several rental properties.  Those ventures have different customer acquisition strategies, earning potentials, and risks.  Even so, the owner wants them both for diversification and smoothing out cash flow.

It makes no sense for this owner to have both operations within the same business.  They have distinct functions, markets, capital allocations, and so on.  So, why risk the car wash if there is a slip and fall on the sidewalk at a rental?  See where we’re going with this?  It also creates a problem if the owner wants to sell one of the two.

Say someone wants to buy the car wash.  Separating it from the assets of the rental properties will create an allocation nightmare.  The acquisition time allocation is much more straightforward if they are each their own entity.  That will help you avoid the top deal killer – time.

So, as you, the serial entrepreneur explores expansion through acquisition, remember the holdco structure and its many benefits.  It can add asset and liability protection, decrease time spent closing deals, and provide natural exit strategies.

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Be Like Bob - Succession Planning

Bob is back with a new lesson to help your business. Many small business owners want to retire. Most don't have a plan on how to make that happen. Steven Covey's second habit is, "begin with the end in mind." As a small business owner, determining your exit (end) will guide your corporate structure and business operations. It will also determine the appropriate level of succession planning for your situation. So, whether your business ends when you walk away, you build an empire and sell, or you build a brand with superb systems that can last for decades after you leave, one thing is certain having a succession plan is important.

Bee Like Bob - Succession Planning

Be Like Bob - Going Public

Bob and Co. were busy after converting their LLC to a C-Corp (learn more here). That move allowed them to bring on investors that added gas to their growth fire. While this is a simplification of the process of going public, it is an example of the best-known investor exit. Investor exits are a major consideration for business owners, as are returns, growth, and how each of these fits into the investor’s time horizon.

Be Like Bob - Going Public

Howdy, Partner!

A lot of small business information available today focuses on LLCs. And while we are big fans of LLCs, there is a more direct and simple solution to get a business going. That solution is a partnership. 

While forming a partnership is as simple as agreeing to grow a business with someone, there is a laundry list of pitfalls to consider. First, and most important, is the unlimited liability for the owners, who may be financially and legally liable. Secondly, a lack of formalities could lead to internal disputes over payment distributions and earnings allocations. Finally, there are ongoing continuity questions that arise if one of the partners dies or otherwise becomes unable to perform their duties.

The good news, for those seeking simplicity, is it is relatively easy to set your partnership up for success. As always, insurance solutions can mitigate some liability issues. Partnerships may consider registering with the Department of State, even though it is not required. Along with registering, the partners should consider drafting a partnership agreement that sets out each partner’s obligations and how to handle transitions if a partner leaves or dies.

Partners may also consider forming a limited liability partnership (LLP). In an LLP, one of the partners assumes managerial responsibility, subjecting themselves to liability for the partnership’s actions. When one partner becomes a managing partner, the remaining partners are considered limited partners and are protected by a liability shield, so long as they do not assume any managerial responsibilities. 

As far as taxes go, partnerships are pass-through entities just like an LLC. Yet another element of simplicity. So if you want to start a business and you are looking for ease of operation, go full cowboy and say, “Howdy, Partner!”

If you have questions about your business structure, give us a call at 724-550-6970.

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

Be Like Bob - LLC to C. Corp. Conversion

LLCs are great for their ease of management and minimal corporate formalities. But, as a business scales, it could attract investors. Those investors are otherwise known as venture capital funds (VC). VCs prefer to invest in C Corporations. There are many reasons like tax considerations and exit strategies. For some business owners accepting fund investment was not on their radar when forming their business. Remember, one of the main considerations of forming a corporate entity is personal asset protection.

So, if accepting fund investments was not in view at formation, the logical step is converting an LLC to a C - Corp. Yes, serious consideration must go into converting membership interests to corporate shares. That time and cost is a drop in the bucket to receive the necessary funds to fuel your company. So, when the VCs arrive #BeLikeBob and convert your LLC to a C-Corp and send your company to the next level.

Be Like Bob - LLC

Bob is back and his assets have grown. Now is the time to think about organizing his business to protect his assets. The simplest method to do that is through a Limited Liability Company (LLC). Yes, Bob will get certain tax benefits, but that is not the most valuable attribute an LLC provides. The most valuable attribute of an LLC is asset protection for its members. The fact that it is not as formal as a corporation is a major bonus too.

Be Like Bob

We are often asked about which business entity is best? We almost always answer with, it depends. So, meet Bob, who will help us better explain when certain business entities might be right for you. Every other week we will follow Bob from sole proprietor to public company. Each time your goal is to #belikebob.

The 85% Rule, Flow State, and Business Growth

Entrepreneurs are notorious workaholics. They eat, sleep, and breathe their business. But is all-out effort, all the time best for business? Maybe. But is it necessary? Are you familiar with the 85% rule?

Knowing what you are doing, inside and out, is important for success. But preparation is only half the battle. When it comes to meetings with clients or ensuring your business performs, achieving a flow state is critical. A flow state—the immersive, full attention, effortless progress zone—is where the 85% rule comes into play. The ability to relax and work at 85% will allow you to take charge of your results.

This philosophy also applies to our approach with our business clients. We know that running your business, not overseeing legal issues, is why owners built their businesses. At The Skeen Firm, we focus on your legal issues and minimize your downside so you can focus on your business and maximize your upside. Reducing stress over legal issues gives owners an increased chance of finding their flow state and peace of mind.

For more info on the 85% rule click here.

Governance - Gosh Darn It!

Your business has grown by double digits each year. Your cashflow is off the charts! When you set your business up, you set a goal to grow and sell after 5 years. As if on script, a bid comes in for your business with an above market offer. You can see the beach home you've always dreamed of, and you are excited for your life of ease.

After signing a Letter of Intent, the deal moves into the due diligence phase. Then it happens. The other side asks for your corporate documents. All that exists are your financial statements, because after all, making money is the business’ goal.

The problem is, the other party needs to know how decisions are made, how strategy is set, what the ethical behavior of the company is, and any risk management in place. The lack of information makes the other party question the business’ integrity and the entire deal. 

Suddenly what seemed like a waste of time and money is costing you a significant amount of money. This is a true situation where an ounce of prevention is worth a pound of cure.

At The Skeen Firm, we take the grind out of governance, allowing you to focus on making money. Don’t let governance issues hamstring your business or be your Achilles’ heel, leaving you to say gosh darn it. 

If you have governance questions or would like a legal audit of your business, give us a call at 724-550-6970.

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.

I’ll Take Corporate Transparency Act and Beneficial Ownership Disclosure for $500

Answer: The Corporate Transparency Act (“CTA”) is part of the Anti-Money Laundering Act of 2020, which Congress added to the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”). 

Question: What is the first time the federal government has stepped into entity formation involving companies that are not publicly traded?  

Excuse our love of Jeopardy! While we are here though, why put your company in jeopardy? By the way, the $500 in the headline is a potential daily penalty for non-compliance with the CTA. Let’s dig in to how this supposed defense measure impacts you and your small business. 

Why did Congress think the CTA is useful?  The CTA requires Beneficial Ownership Disclosure (“BOD”) of all reporting companies. To keep it simple a reporting company is any corporation, LLC, or other similar entity formed with any state or foreign government. A beneficial owner of this kind of company is any person or entity with over 25% ownership. 

Why is it important and how does it relate to national defense? That answer is more complex than it appears. It boils down to two main reasons. The first reason is the difficulty of tracking owners of the more than two million corporations and LLCs formed each year. The second reason is the potential to launder money created by this difficulty. 

With that in mind, Congress decided now was the time to up its efforts in fighting money laundering. The current regulatory scheme allows for a lot of anonymity in business ownership for companies not regulated by the SEC. This regulatory scheme creates an ideal environment to conduct business through “shell” companies. These shell companies further distance an individual from ownership. It is easy to see how this scheme could create a laundering operation labyrinth. The complexities could make prosecution elusive. So as is often the case, the many now pay for the few. 

While the regulations are not final, we do know that all newly registered entities will have compulsory BOD reporting at filing. The rule for existing entities is less clear. The United States Treasury Financial Crimes Enforcement Network (FinCEN)did propose rules for implementation in 2022 in December 2021. Comments on the proposed rule close on February 7, 2022. Either way, the time to get ahead of this change and rule is now. We will keep you updated on the final rule once it is available. 

Contact The Skeen Firm today at 724-550-6970 or info@theskeenfirm.com to set up your CTA compliance plan. 

*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.