One of the first and most important decisions you now face is deciding what form of business entity to own and operate your business venture. There are several options, including-
• a sole proprietorship or general partnership;
• a limited partnership;
• a limited liability company;
• a limited liability partnership;
• an S-corporation; or
• a regular corporation- a C-corporation.

For nearly every business owner reading this article, the choice is fairly simple. Most Indiana businesses should operate either as an S-corporation, regular corporation, or limited liability company. These three entities offer business owners limited asset protection and relative ease of operation. In deciding the best business structure to utilize, each business owner should consider a variety of general factors and also the circumstances unique to the business, its owners, and its opportunities and challenges.

Before forming a new business entity, a good business attorney will spend time with a business owner to discuss and consider factors such as these-

• Will the business consist of an operating entity or a holding company?
• What are the likely tax liabilities arising from the business?
• If an operating entity is chosen, can FICA taxes be minimized?
• How will the business be financed?
• What is the exit strategy?
• What business risks are being avoided?
• Do the owners and managers have the requisite training and vigilance to maintain a more complicated structure?
• What are the costs, benefits and burdens of creating a particular business structure?

As explained above, a business should be operated as a limited liability entity to protect the assets of the owners. That is the central reason to form a business entity.
One of the first and most important decisions you now face is deciding what form of business entity to own and operate your business venture. There are several options, including-
• a sole proprietorship or general partnership;
• a limited partnership;
• a limited liability company;
• a limited liability partnership;
• an S-corporation; or
• a regular corporation- a C-corporation.

For nearly every business owner reading this article, the choice is fairly simple. Most Indiana businesses should operate either as an S-corporation, regular corporation, or limited liability company. These three entities offer business owners limited asset protection and relative ease of operation. In deciding the best business structure to utilize, each business owner should consider a variety of general factors and also the circumstances unique to the business, its owners, and its opportunities and challenges.

Before forming a new business entity, a good business attorney will spend time with a business owner to discuss and consider factors such as these-

• Will the business consist of an operating entity or a holding company?
• What are the likely tax liabilities arising from the business?
• If an operating entity is chosen, can FICA taxes be minimized?
• How will the business be financed?
• What is the exit strategy?
• What business risks are being avoided?
• Do the owners and managers have the requisite training and vigilance to maintain a more complicated structure?
• What are the costs, benefits and burdens of creating a particular business structure?

As explained above, a business should be operated as a limited liability entity to protect the assets of the owners. That is the central reason to form a business entity.

One of the first and most important decisions you now face is deciding what form of business entity to own and operate your business venture.  There are several options, including-

•    a sole proprietorship or general partnership;
•    a limited partnership;
•    a limited liability company;
•    a limited liability partnership;
•    an S-corporation; or
•    a regular corporation-  a C-corporation.

For nearly every business owner reading this article, the choice is fairly simple.  Most Indiana businesses should operate either as an S-corporation, regular corporation, or limited liability company.  These three entities offer business owners limited asset protection and relative ease of operation.  In deciding the best business structure to utilize, each business owner should consider a variety of general factors and also the circumstances unique to the business, its owners, and its opportunities and challenges.

Before forming a new business entity, a good business attorney will spend time with a business owner to discuss and consider factors such as these-

•    Will the business consist of an operating entity or a holding company?
•    What are the likely tax liabilities arising from the business?
•    If an operating entity is chosen, can FICA taxes be minimized?
•    How will the business be financed?
•    What is the exit strategy?
•    What business risks are being avoided?
•    Do the owners and managers have the requisite training and vigilance to maintain a more complicated structure?
•    What are the costs, benefits and burdens of creating a particular business structure?

As explained above, a business should be operated as a limited liability entity to protect the assets of the owners.  That is the central reason to form a business entity.

Sole proprietorships and general partnerships offer no protection to their owners or to the entity itself.  By contrast, limited liability companies, limited partnerships and corporations are limited liability entities which provide significant but limited protection from liabilities arising from the business’ operations.  Generally, what is at risk for an owner is the value of the investment made by the owner in the entity.  Business lawyers refer to this as “inside out protection,” because the liabilities arising inside the entity will not reach the assets of the owner held outside of the entity.

Of course, selecting the right entity is just the first step in this process.  Careful drafting of documents, the proper filing of documents with governmental offices and establishing processes and procedures to follow the so-called “corporate formalities” are equally important steps in limiting the liability risks to the business’ owners.  These topics are addressed in other articles, but the entire process starts with the list of factors relevant to selecting the right entity.

If you are starting a new business or are unsure whether your current entity is properly structured, contact your business attorney to review the issues raised in this article.

Posted on | May 1, 2010 | No Comments

I started the Griffith Law Group to serve the needs of solopreneurs, entrepreneurs, small to medium sized business, and business owners.  We also help real estate investors, builders, building trades, property managers and other real estate professionals.   

We encourage you to sign up for our electronic newsletter, through which we share important business news and information about changes in the law that might impact your business or real estate interests.  Learn more at www.IndyBizLaw.com.

Matthew A. Griffith, Attorney

Matt@IndyBizLaw.com

Announcing the formation of my new law firm. . .

Posted on | April 9, 2010 | 1 Comment

After 18 years of practice with a downtown Indianapolis law firm, I am pleased to announce that I am launching the Griffith Law Group- my own law firm dedicated to serving the needs of solopreneurs, entrepreneurs, small to medium sized business, and business owners.  I will also continue my work representing real estate investors, builders, building trades, property managers and other real estate professionals.  Initially, our new offices will be located in the first Small Business Development Center developed by Rainmakers Marketing Group, Inc.

Starting on May 1, 2010, my new contact information will be:

Griffith Law Group

7208 N. Dobson Street

Indianapolis, IN  46268

317-663-0650

Matt@IndyBizLaw.com

The Griffith Law Group will offer legal services in a very different, results-oriented style.  Our emphasis is on educating clients and empowering them to make good business decisions that are cost-effective and consistent with their personal, financial and professional goals.  To learn more about how our approach to the practice of business and real estate law is different, please visit our website:

  www.IndyBizLaw.com

We also encourage you to sign up for our electronic newsletter, through which we share important business news and information about changes in the law that might impact your business or real estate interests.

As always, please feel free to contact us with any questions or concerns about your business, real estate or other legal needs.  We look forward to serving you.  

Matthew A. Griffith, Esq.

Is Your LLC or Corporation Current & Updated?

Posted on | April 5, 2010 | 1 Comment

Limited liability entities- such as corporations and limited liability companies- require basic maintenance.  Yet, amazingly, a large percentage of Indiana corporations and Indiana LLC’s are not updated by management or owners.  What they risk by failing to upkeep these entities is nothing less than having a court ignore the “corporate shield” by applying liability directly on the owners of the corporation or LLC.

It is not expensive or hard to maintain an Indiana corporation or Indiana LLC.  The necessary tasks should begin with a visit to your business attorney, CPA and insurance agent.  However, those are just the three most important tasks to complete.  There are several others. 

Here is a short list of important tasks to complete regularly-

1. Visit yourIndiana business attorney to review the corporate records and status of the business.
2. Visit your CPA for a review of the financial health of the company.
3. Visit your insurance agent to contact a full insurance review.
4. Hold an annual meeting of the owners- members in an LLC and shareholders in a corporation.  Elect LLC-managers or corporate directors at these meetings.
5. Hold an annual meeting of the directors in a corporation.  Elect officers at this meeting.
6. Create minutes of all annual meetings.
7. File biennial reports with the Secretary of State.
8. Update an assumed business names with appropriate filings with the Secretary of State and county recorder.
9. Remind officers and key personnel on the appropriate operations of a limited liability entity.
10. Review all contracts, processes and procedures that might lead to liabilities.
11. Conduct a risk audit, which should include a physical inspection of your business facilities.

Of course, each business has unique needs, but this list generally applies to businesses of all types and sizes.

Avoid Collection Problems- How to Get Paid by Your Clients

Posted on | March 27, 2010 | 2 Comments

Businesses often experience difficulties in collecting monies owed to them by their customers and clients as soon as the business first begins offering its goods and services. Every business has experienced some difficulty in getting paid all it is owed, and many business plans are formed with the presumption that a certain percentage of the business’ accounts receivable will go uncollected. The problem of collecting accounts receivable is not usually the cause of a business’ failure, as more businesses fail from undercapitalization. However, collections problems can prevent a business from growing and will always negatively affect the business’ profitability.

There are things a business can do to minimize its risks that an account receivable will become uncollectible. And as is usually the case, preventing the problem from occurring is far less costly than curing the problem once a client or customer fails or refuses to pay you for your goods and services. Whether your business is the sale of pastries, providing rental housing or the construction of high-rise office buildings, the following suggestions, where applicable, should help you increase your collections and avoid much frustration and anguish in the process. Try following these basic collections rules.

Get It In Writing.
It may sound elementary, but it is so very important that you memorialize your agreements with customers, clients and other businesses. Any change, termination or other modification of an agreement should also be memorialized. For example, in a construction context, a “Change Order” form may often be used. To avoid a variety of legal and tax trappings, all written documents, including your regularly used forms, should be reviewed by your legal counsel and tax advisors.

Get Paid In Advance.
Easier said than done, but your goods and services are not free. You should require substantial deposits and down payments before you begin ordering parts or using materials. And you should require payment-in-full before you begin performing services or relinquish control of your property. Remember that until your customer has paid you for a good, the customer is not entitled to the fruits of your labor. This rule may best be exemplified by the landlord who demands rent to be paid on the first day of every month during which the tenant will occupy the leased premises. In essence, the tenant pays in advance. But when the tenant fails timely to make the rent payment, the tenant is essentially a trespasser and the landlord should immediately begin eviction proceedings.

If You Don’t Get Paid In Advance, Get Security.
Obviously, this rule does not apply to leasing agreements or the simple cash transaction such as the sale of a dozen doughnuts. In larger transactions, particular those involving the sale of moveable personal property and real estate, the seller should demand a security interest in something of value. A mortgage, a recorded land contract, a mechanic’s lien and a lien on personal property are familiar examples of security interests. But many people forget that a business can agree to provide services, such as structural repairs to a house, and in exchange receive a security interest in an entirely different property, such as an office building, delivery truck or car owned by the customer. Or alternatively, that same business could require a security interest in the house, office building, delivery truck and car, or some combination thereof. Having a security interest may also improve your chances of recovery in the event the customer files for bankruptcy protection.

If The Customer is Credit Risky, Demand A Co-Guarantee.
Many businesses extend credit to customers while fearing that the customer is a credit risk. In such circumstances, the customer should be made to provide the signature of a co-guarantor who promises to pay the customer’s debt to you in the event the customer does not. Remember, however, that the co-guarantee is only as good as the co-guarantor is creditworthy.

If Your Contract Does Not Allow For Collection Costs,
You Connot Get Them.
The “American Rule” is that litigants pay their own attorneys’ fees. So, if you must retain an attorney to collect a debt, you will pay the attorneys’ fees and most other collections costs. The exceptions to the American Rule are the existence of a written contract allowing the recovery of attorneys’ fees, a statute allowing such recovery; or the assertion of a frivolous, unreasonable or groundless claim or defense. The easy solution to the American Rule is to include a provision in your contracts allowing YOU to recover your attorneys’ fees, collections and court costs. Your customers should not have the same right to recover against you.

The Check Is Never Truly In The Mail.
The lesson here is to begin legal proceedings as soon as possible and not to delay in collecting your money or retrieving your property. Equally important, you should read your written agreements to determine whether you are required to provide any notices or demands to the customer before commencing a collections action against the customer. The longer you wait, the more likely the customer will be difficult to locate; the customer will have been hidden his/her assets; or your property will have been destroyed, devalued or transferred to third-parties.

As a final suggestion, consult your attorneys as soon as you suspect difficulty in collecting a debt. Often a stern letter from an attorney on a law firm’s letterhead can have a dramatic effect on a delinquent customer. You also should consider consulting your attorneys to review your entire billing and collections processes. Thrasher Buschmann Griffith & Voelkel, P.C. has often assisted businesses whose agreements, leases and other forms were outdated or lacking important provisions which would allow the business to pursue additional remedies against a delinquent customer. If we can help you or your business, please contact this author.