Are you waiting for Obama’s bailout? Seriously?
Posted on | January 29, 2009 | 1 Comment
If you are a business person and you’re hoping that the bailout bill working its way through Congress is going to save our economy, read on.
Congress is not going to save your business!
President Obama is not going to increase your gross revenue this year!
The Federal Reserve can’t help you, either.
YOU AND ONLY YOU HAVE THE ABILITY TO MAKE YOUR BUSINESS A SUCCESS IN 2009. DON’T WAIT FOR GOVERNMENT TO HELP YOU. HELP YOURSELF.
Let me make that point by showing you why the bailout bill is flawed and won’t trigger the economic recovery we all hope to see in 2009, or early 2010.
The recession started with the collapse of the real estate market. There’s little doubt about that. And, there is little doubt or debate that (1) real estate was over-priced before the crash and (2) real estate is under-priced now. Almost all homeowners have lost SOME equity they had in their homes. And, a large percentage of homeowners across the nation have lost ALL their home equity. That’s largely because most homeowners had high loan-to-value ratios. In other words, there wasn’t much equity to lose in the first place.
Much of the country’s economic health and much of the nation’s banking and financial systems are tied to real estate. Real estate values are down, because supply (inventory) has outpaced demand. We have too much home inventory in most parts of the country. We have too few buyers. Do the math- FORECLOSURES AT RECORD LEVELS.
So, you’d think that Congress and a new President with a historically high appproval rating would be focused, in some measure, on stimulating the housing markets. I am not suggesting that we encourage more home building, not for a while. We do need to bring more buyers to the market to purchase EXISTING inventory. I love home building. I have many home builders as clients. But, we need to sell more of the existing home inventory first, before we create even more inventory.
So, what’s Congress and the President doing to encourage the purchasing of existing homes?
Practically nothing.
The economic stimulus bill that was passed by the House Wednesday, January 28, does not go far enough to help home buyers and existing home sales. The House bill does remove the repayment requirement for the current $7,500 home buyer tax credit, but the bill fails to expand the credit to all home buyers. The bill fails to increase the credit amount past $7,500. The bill fails to extend the credit through the end of the year. And, the bill fails to make the credit available at the time of the sale/purchase.
The Senate has started to debate its version of the stimulus bill and will probably extend the tax credit through September 1, 2009. But, that’s about it.
Here’s the irony of the current state of affairs- We got in this mess, because, in large measure, Congress encouraged lending to people who could not afford a home loan. That contributed to home ownership at record levels, but also has resulted in record loan default rates.
Now, when we need Congress to stimulate home ownership, Congress and the President are going to spend nearly $900 BILLION on new roads and other “shovel ready” projects. But, nothing on real estate.
What’s this mean to your business or personal affairs? You can expect the recovery to take a long, long time. Dig in. Partner up. Get busy. We’ve all got work to do. Make your own good fortune (a/k/a “luck”) in 2009. Don’t wait for someone else to bail you out. Do it yourself!
Is your insurance agent reassuring?
Posted on | January 28, 2009 | 33 Comments
How do you know if your insurance agent sold you the right insurance coverage?
You’ll never know for sure, unless you suffer a casualty, loss or judgment. Or, you can follow the instructions in this blog!
I am a huge proponent of getting insurance to cover your personal and business risks. But, the key to insurance is getting the right type and the right amount of coverage.
Let me illustrate these lessons with the story of two of my clients: Fred and Bill.
THE STORY OF FRED – BUYING THE WRONG COVERAGE. Fred ran his business out of a spare bedroom in his house. Twice each week, Fred had a few contractors come to his home for business meetings. One winter day, Fred’s favorite contractor (Stanley) walked up Fred’s driveway, slipped on some ice and broke several bones. Stanley had no disability or health insurance, and was out of work for weeks. Stanley, being self-employed and thus unemployed, turned to Fred: “Hey Fred, I got hurt because you didn’t clear your driveway of ice. Can you pay me my lost income, while I heal?” Fred calls his insurance agent and makes a claim.
BUT THERE’S NO COVERAGE FOR FRED! Fred’s homeowner’s insurance doesn’t cover business risks. Stanley is a business invitee. There’s no coverage for a business invitee who gets hurt doing business at Fred’s home.
THE STORY OF BILL- BUYING TOO LITTLE COVERAGE. Bill owns a business- a restaurant. One day, there is a grease fire in the restaurant and Bill loses $225,000 of equipment and tools (stoves, ovens, utencils, pots, pans, etc.) and $150,000 of leashold improvements (plumbing, carpet, walls, restrooms, etc.). Bill calls his agent and makes an insurance claim.
Then Bill gets the bad news- Bill has $200,000 of coverage on equipment. He’s short $25,000 of coverage. But the insurance agent has some good news. . . there’s $300,000 of coverage on the improvements.
What?
What?!
What?!!!!
Bill was UNDER-insured on equipment and OVER-insured on improvements. What a waste.
Could Fred and Bill have done something differently? Was this the agents’ fault? Do these situations happen often?
Yes. Maybe. And yes.
There are solutions. There is a better way to communicate with your insurance agent in developing a great business insurance plan. Stay tuned to this blog. I’ll cover these topics in future blogs. For now, you should recognize the importance of buying the right TYPE and AMOUNT of coverage.
CHECK OUT OTHER ARTICLES I’VE WRITTEN ON IMPORTANT BUSINESS, REAL ESTATE AND LAW-RELATED MATTERS: http://indiana-attorneys.com/articles_news/index.htm
Kyle Lacy & I are teaching a class- February 25, 2009
Posted on | January 26, 2009 | No Comments
Kyle Lacy is a social media mastermind (He paid me to say that.) Check him out at www.getbrandswag.com or www.kylelacy.com
My law firm does a lot of trademark work for our clients. We trademark company names, product names, service marks, tag lines, etc. We also develop strategies to protect names and logo’s
Kyle Lacy develops marketing strategies that utilize great branding.
Together, we are going to teach how to develop a brand strategy and then legally protect it.
FEBRUARY 25, 2009 , 12:30 P.M. 8604 Allisonville Rd. Suite 300, Indianapolis, 46250
$25.00 TUITION FEE
EMAIL KYLE OR ME IF YOU’RE INTERESTED.
Asset Protection – “It’s as easy as 1 – 2 – 3!”
Posted on | January 25, 2009 | 1 Comment
If you own a business or are going to start one, you MUST develop a plan to keep your personal assets protected against business risks. Such planning is as important as your marketing plan, your capitalization plan, or your sales strategies.
So, how do you develop and implement an asset protection plan?
There are time-tested, court-approved and easy things to do to keep a lawsuit from ruining your finances. Here are the three key elements:
- #1 Use a corporation or LLC.
- #2 Get some insurance.
- #3 Develop and implement Standard Operating Procedures.
That’s it. Those are the keys. There’s more to learn about each of these three key elements, of course, but EVERY business should have an asset protection plan and EVERY plan should include all three elements. WITHOUT EXCEPTION.
You can’t wait to get sued and then implement your protection plan. At the moment you have a dispute with a customer or another business, it is too late to plan. So, you have to develop and implement your plan TODAY to prevent TOMORROW’S risks from ruining your financial FUTURE.
Asset protection planning is not fun. It’s not exciting. It doesn’t generate profits. And, it costs some money to do it properly. So, most owners ignore it or avoid it, until it’s too late.
DON’T WAIT UNTIL YOU GET SUED! An ounce of prevention or the pound of cure? It’s your choice. Which will you chose?
Tags: Asset Protection > attorney > corporation > court > damages > fraudulent transfer > Indiana > Indianapolis > lawsuit > limited liability > llc
Thanks to Kyle Lacy- my blogging mentor.
Posted on | January 23, 2009 | No Comments
Do you understand your lawyer? How about your CPA? Your insurance agent? Do you realy understand the contract your lawyer wrote? Do you know whether you bought the right insurance? Are you sure your CPA is maximizing your tax savings and minimizing your audit risks?
For example, what is “recapture?” Did your CPA explain it? What is “force majeure?” Did your lawyer explain it? Are you covered for all likely insurable risks you might face?
Probably not.
That has been my observation as an attorney for (almost) two decades. For 18 years as a lawyer and business coach, I’ve been amazed by how poorly other attorneys, CPA’s and professional advisors communicate. These advisors do a horrible job teaching their clients. Their communication skills are dreadful. You’d think that a trial attorney, for example, would be a good communicator, but most aren’t. A trial attorney’s job is to communicate to a judge or jury. Yet, these same trial attorneys fail to talk to their clients in a way that enables the client to understand what the options and consequences of case strategies and tactics might be. THE CLIENT SHOULD ALWAYS BE GIVEN A CHOICE! It may be that these advisors are so confident in their skills and client-matter strategies that they see no value in engaging the client in what I call “teaching.” That’s what I do- teach. I try to “teach” my clients so that they can make good decisions for themselves.
TEACHING- It means, as an advisor, I do these things for my clients:
- Ask questions to get all the facts.
- Explain what facts are relevant.
- List and describe all the client’s options.
- List and describe the costs and benefits of those options.
- Help the client weigh the costs and benefits.
- Guide the client to the best possible decision.
So, ask yourself this- “Does my professional advior “teach” me so I can make good choices? Or, is some other process going on- one more convenient to my advisor and not so great for me- the client?
I took a class from Kyle Lacy (Just Google his name to see how big Kyle is in his field.) about blogging. In the class, Kyle asked us (students) to consider whether we have anything of value to say. And he warned that we better be passionate about the subject before we start blogging about it. Having spent the past week reserching how to blog, I completely understand Kyle’s challenge. There’s no point in blogging just to blog. Today, there are 70 Million blogs. My guess is that most of that is just meaningless noise. I hope a large number of people “hear” my blog. That will be a reflection on the value of my blog and the passion I bringto it.
The “mission” I’ve adopted in this blog has been a passion of mine for years. My mission is to teach business people about business and the law, and, most importantly, how to get more out of their relationship with their professional advisors.
I hope to field your questions to me about business and the law. But, let me start this blog with a question to you- Do you feel good about the communication between you and your professional advisor? Are you completely confident in what your advisors are advising? Let’s start my blog with your thoughts, experiences and questions.
Here’s your chance to talk to a lawyer for free. Just ASK MATT.
Thanks. And Happy Blogging.
What is the corporate veil or shield?
Posted on | January 23, 2009 | 1 Comment
Question: ”What is the corporate veil or shield?
Matt’s Answer: The corporate veil is a legal fiction by which the owners of a business cannot be held personally liable for the bad acts of the business, if the business is a limited liability entity (”LLE”). LLE’s include limited liability companies (LLC’s), limited partnerships, corporations, and other business forms that vary from state to state. However, there are rules limiting the protection provided by an LLE.
In most states, the following factors describe the standard by which a corporate veil could be pierced or ignored, allowing the owners to be sued personally. In deciding whether a plaintiff has met the burden to pierce the corporate veil, courts consider whether the plaintiff has presented evidence showing: (1) undercapitalization, (2) absence of corporate records, (3) fraudulent representation by corporate shareholders or directors, (4) use of the corporation to promote fraud, injustice, or illegal activities, (5) payment by the corporation of individual obligations, (6) commingling of assets and affairs, (7) failure to observe required corporate formalities, or (8) other shareholder acts or conduct ignoring, controlling, or manipulating the corporate form.
As a lawyer, I think that list is enormous. There are many, many “Do’s” and “Do Not’s” in this list of eight factors, far too many to discuss in this post alone (Stay tuned to the blog for details!). Unfortunately, very few lawyers take the time to educate their clients on how to operate a corporation or LLC. Few lawyers list or describe the eight factors that could cause a corporation or LLC to be ignored. Most lawyers simply file Articles with the Secretary of State to form the corporation, LLC or other entity, and create By-Laws or an Operating Agreement, and maybe a few minutes of an organizational meeting. And that’s about it. No training. No education. No practical guidance or explanation. The clients who receive these services and nothing more are often left with a false sense of protection by their new corporation or LLC, and that is a shame.
If you are operating a business, including a real estate-related business, you need to operate that business in a limited liability entity of some sort. You also need documents and training, as follows:
1. A complete record book with proper Articles; By-Laws or an Operating Agreement; minutes of meetings; notices or waivers of notices of those meetings; resolutions; stock certificates; buy-sell and related agreements among owners; certificates of assumed business names; and more.
2. A plan to maintain the corporate record book.
3. A registered agent that can easily receive notices and service of process for your entity.
4. A business plan.
5. An insurance plan to integrate with your business plan.
6. The use of other asset protection techniques.
7. A tax plan integrated with your business plan.
8. Education on how to operate the entity and its finances- practical lessons like how to complete and sign contracts.
9. Adequate funding of the business.
10. A plan to pick the correct entity form and structure.
11. A strategy for maintaining the entity after it is formed.
12. The correct tax documents and an EIN.
13. An education on fraud, use of contractors and employees, risks of personal liability, isolating risks as to co-owners or spouses, risk assessment, etc.
14. Avoid off-shore trusts, Nevada corporations, land trusts disguised as living trusts, and other tricks. Stick with time-tested, lawful entities, insurance and good business practices.
15. Avoid using an entity as a means of committing fraud or fraudulent transfers.
16. and much more. . .
It typically takes me an hour and one-half at a minimum to teach clients how to structure and operate a simple LLE business. If all you have done is filed the one-page form on the Secretary of State’s website and paid your $90 to $150 filing fee, then you have not yet satisfied the requirements of limited liability. I wish you good luck, because luck is all that is protecting you.
If your lawyer does not spend at least an hour talking to you about these concepts, find a better lawyer. Client-training and education are the most important things I do for my clients.
Do not make the mistake of buying corporate or LLC forms on-line or through an unlicensed, non-lawyer (like a real estate speaker). Do not make the mistake of having your accountant do your legal work. Go see a lawyer who knows Indiana law, real estate and how to assist and educate you in the creation, organization and operation of your limited liability entity. There are great lawyers who can form an LLE in perfect form, but who can’t teach these concepts. Your lawyer needs to be a good teacher, as well as legal writer. The point cannot be overstated. It’s that important.
Tags: Asset Protection > attorney > charging order > corporation > court > damages > dispute > fraudulent transfer > Indiana > Indianapolis > lawsuit > liability > limited liability > llc > llc's > partnership
Did Your Lawyer Teach You When To Ask A Question?
Posted on | January 23, 2009 | No Comments
I bet your lawyer is a lousy teacher!
I form dozens and dozens of corporations, PC’s, LLC’s and other similar limited liability entities. When I do, I meet in person with the client and spend 1.5 to 2 hours teaching my client how to use the entity and what to avoid. I don’t just teach the “rules” of legal entities. Most importantly, I teach my clients the rationale behind the rules. I give examples, samples, stories, etc. Good lawyers use a variety of tools to teach. And, I “test” how quickly the client is grasping the concepts, so I can speed up or slow the pace of my teaching.
Why? Why would I teach the RATIONALE behind legal rules?
Because if a client is taught WHY he/she should operate in a certain way, then the client is more likely to know what to do when I’m not around. Let me say that better. A good lawyer teaches a client what to do, when to do it, why, and when to pick up the phone to call for more help!
Not all clients follow a lawyer’s teachings. Not all lawyers teach. Most lawyers just decide what a client should do and then THE LAWYER IMPLEMENTS A PLAN. That is wrong. The client should make nearly all decisions (There are a few exceptions.) The client should be a huge part of the plan’s implementation.
More than once in my 18 years of law practice, I have had to say to a client in trouble: “Don’t you remember we talked about _______ and _________? Why didn’t you follow those lessons?” Those clients have no excuse, and I feel bad for them.
While there’s no excuse for ignoring good advice, the question remains: ARE YOU GETTING GOOD ADVICE FROM YOUR PROFESSIONAL ADVISORS?
ARE YOU SURE? HOW DO YOU KNOW?
Tags: Asset Protection > attorney > business plan > Indiana > Indianapolis > lawsuit > limited liability
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