Yes, no, sometimes and maybe.

The answer as to what registration is required for a business depends on two things: (1) the legal entity you create to operate your business and (2) the nature of your business.

Small business owners often make the mistake of creating a corporation or LLC without completing basic steps.  Use this short checklist to review whether you formed or registered your business properly.

1. Pick the right legal structure for your business. Your options include the limited liability company (LLC), general or limited partnership, limited liability partnership or corporation. Your business lawyer and your accountant should be consulted.  You should consider such factors as the number of owners, the business plan, the capitalization plan, taxes and other factors.

2. File a Certificate of Business Name. Most businesses use a shorten name, called a trade name, for marketing purposes.  ACME Medical Products, Incorporated will be marketed as “ACME” or “ACME Medical Products.”  One of the cheapest and most important things you can do keep your limited liability “shield” in place is to file a Certificate of Assumed Business Name in order safely to use trade names.

3. Register for your business’ Federal Tax ID. All partnerships, multi-member LLC’s and corporations must have an Employer Identification Number, which can be obtained from the Internal Revenue Service.

4. Register with the State Revenue Agency and Obtain Permits/Licenses.  Depending on the nature of your business, you may be required to register with your state, especially if you sell a product and are required to collect sales tax.  In some parts of the country, you might even be required to obtain local permits or licenses.

Of course, this is the short list, and your business may be required to obtain other permits or licenses, or you may be required to register with other governmental agencies.  See your legal advisor for help.

Matthew A. Griffith is an attorney, business performance coach,mentor and entrepreneur.  He coaches, advises and guides business owners, entrepreneurs, inventors, property managers, investors and real estate professionals.  Matt has nearly two decades of experience helping businesses grow.

Starting and running a small business takes desire, passion, skills, knowledge and talent. It also takes research and planning. While many small or start-up businesses can recover from early mistakes, many cannot.  Every small business makes initial mistakes, but no small business can survive fatal missteps.  So, planning is important. 

Explore and evaluate your business and personal goals.  Using those goals, craft a comprehensive and thoughtful business plan that will help you reach these goals.  The process of creating a plan forces you to think about important issues that you might not think about without planning.

A plan is a valuable tool that can serve multiple purposes.  But like hand tools, a business tool left in the “tool box” and never used is worthless.  Again, the process of planning is most important, rather than detailing the plan in a formal written document.  I recommend that plans be written, but the written document is not more important than the planning process itself.

Let’s Get Started-

List your reasons you want to start a new business. Consider this list to start your thinking:

• Self-management or freedom
• Financial independence
• Creative freedom
• Maximize personal skills and knowledge you’ve developed over the years

Decide what type of business is right for you. Ask yourself:

• What do I enjoy doing?
• What skills have I developed?   What value can I add?
• What am I good at doing?
• How much money do I need to support myself?  My family?
• How much time do I have to run a successful business?

What’s my business niche?

• What business do i want to start?
• What services or products can I sell?
• What need, want or desire can I meet?
• Will buyers pay for it?
• Is there competition?   Competition is not always bad, as it demonstrates a market for your product or service.
• What strategic advantage do I have over the competition?
• Can I deliver a product or service with better quality, cheaper, faster?
• Do i have to create a demand for my business?   How hard will that be?

Finally, consider these tough questions:

• What skills and experience do I lack?
• What legal structure will I use?
• How will I keep business records and data?
• What insurance do I need?
• What equipment or supplies do I need?
• How will I pay myself?
• What are my resources?
• What are my cash or credit needs?
• What facilities do I need?  Is location important?
• What will I name my business?   Is my brand important?

As you can see, these lists are long but still probably not comprehension.  Small business owners must go through this process.  It’s not always fun, and the answers might suggest that starting a small business is a bad idea.  Resist the urge to accept any answer that furthers your dream but is not supported by facts.  In other words, as you answer these question, be honest with yourself.  Not every business should be started.

If your honest answers suggest that starting a new business is a good idea, use your answers to create a focused, well-researched business plan.  A good plan is a blueprint for business operations, management, and capitalization.  Review your business with your business lawyer, your CPA, friends and business associates.  Schedule a monthly review of your plan, and be prepared to change the plan frequently.  A good business plan is a flexible one that should change as you encounter obstacles and your business grows.

Matthew A. Griffith is an attorney, business performance coach,mentor and entrepreneur.  He coaches, advises and guides business owners, entrepreneurs, inventors, property managers, investors and real estate professionals.  Matt has nearly two decades of experience starting small businesses and helping businesses grow.

Recently, I was helping a client write a User’s Manual for a new product it is going to manufacture.  I was writing warnings about injuries that could result from the misuse of the product.  Later, as I was explaining to the client why I included some fairly obvious warnings, it struck me how ridiculous the law has become and how businesses are constantly under threat from frivolous lawsuits.

Mind you that this post is not about dangerous products or unsafe stores.  Rather, this is about customers and clients blaming you and your business for obvious errors made by the client or things clearly beyond your control.  Let me give you some examples to illustrate my point.

In products liability cases, manufacturers have to tell a consumer how to use and how NOT to use a product.  Manufacturers must also warn consumers about the consequences of misusing a product.  It is not enough to assume that a consumer will use a product for its obvious and intended purpose.  Nor is it enough to assume, for example, that a consumer understands that lighting a charcoal grill in the living room might cause a house fire or dangerous fumes that might harm people’s lungs.  You have to assume, as another example, that a consumer might try to scrap paint off an old house using a weed wacker.  Sounds ridiculous, but that’s a fair view of how the law now works.

The law requires you to protect your business against the dumbest customers imaginable.  Assume that your customers will make the silliest mistakes.  Now guard against those risks.  Unfortunately, that’s how you must now operate.  You cannot assume that your customers are of average intelligence.

Please understand that there is a gap between what the law says and how it is actually applied.  The law does not actually require you to protect yourself from injuries or losses sustained as a result of a customer’s unreasonable errors in judgment, but judges and juries apply the law that way.  Bad facts, as we say, make bad law.  Sure, you can appeal.  But at what costs?

Most people have heard of the “reasonable man” or “reasonable person” standard.  That remains the law.  There is, however, the reality of what judges and juries do in actual cases.

The solution to these business risks is to prevent claims and lawsuits by assuming the worst.  Create systems, policies and procedures that guard against claims by your dumbest customers and clients.  Get insurance.  Work with a good attorney, and take my warnings seriously.  In short. . .

Hope for the Best, but Plan for the Worst. 

Guest Post by Matt Jackson, Vice President, Halakar Real Estate.

Introduction by Matthew A. Griffith:

Everyone is watching the real estate market these days, because of the strong links between the state of our economy and real estate.  What is important to remember, however, are two things:

1.  All real estate is local, and

2.  Residential and commercial real estate are very, very different markets.

I meet with experts on a regular basis to learn what they know.  So, I recently sat down with Matt Jackson, Vice President, Halakar Real Estate, to talk about the state of real estate here in Central Indiana.  Matt had some very interesting observations about commercial real estate being a barometer for how small business is coping with the recession.

After we met, I asked Matt to share more of his thoughts and observations for my blog.  Here is a guest post by Matt.  Please enjoy:

_______________________________________________________

Why Hire a Commercial Real Estate Broker

Matt Jackson, Vice President, Halakar Real Estate

Matt Jackson, VP, Halakar Real Estate

One Indiana Square
Suite 2500
Indianapolis, IN 46204
Office: 317-964-0000 Ext. 228
Mobile: 317-340-3969       
Fax:    317-964-1144
MJackson@Halakar.com

A real estate transaction tends to be one of a business owners least favorite items to deal with.  There are three reasons why:

1) Time.  A business owner or their office manager does not have the time to deal with office/industrial leasing matters because they are too busy guiding their ship.
2) Lack of Market Knowledge.  Most tenants of leased space are not in the commercial real estate business therefore they are unaware of market trends.   If a owner is proposed a 3% rent increase is this “acceptable” per market standards?  Business owners are too busy worry about their company to worry about what they should be paying per square foot in rent.
3) Cost.  We all have heard time is money and typically the owner of a business’ time is extremely valuable, therefore any time that is spent on dealing with lease negotiations is time that is spent away from building ones business.

The solution for this problem is to find a commercial real estate broker that you TRUST.

Commercial real estate is not rocket science but there are certain matters of negotiation that do change on a week to week if not day to day basis.

There are some common misperceptions of negativity in hiring a commercial real estate broker that some tenants have.

Tenant: “My attorney is going to help me with my lease negotiation”.

Response: Should your attorney be involved with your leasing process? ABSOLUTELY.  In any instance that a tenant is leasing space they should have their attorney review their lease.  A lease is always written to benefit the writer (aka-the landlord).

Tenant:  “I don’t want to pay a fee to you for representing me” or “I don’t want to have to pay more for having a broker represent me”.

Response:  First and foremost commercial real estate brokers typically do not charge a fee for their services as the tenant’s representative is typically paid by the landlord… thus leading to… Tenants have a belief that if a landlord is paying a fee to their representative it will be reflected in their rental rate.  A broker’s job is to reduce their client’s overhead, not amortize their fee in a lease.  If a broker does a good job for their tenant the tenant will see a REDUCTION in their rent – not an increase.

Tenant:  “I don’t want to anger my landlord because we have a good relationship”

Response:  No one is in the business of ruining relationships and it stays true in commercial real estate.  A broker is simply the “trusted advisor” that a tenant hires to make sure they are making wise business decisions.  A landlord will not look at this negatively as 9 out of 10 times the landlord has a broker – so shouldn’t you as a tenant do the same?

90% of the job of a commercial real estate broker is EDUCATION.  At no point will you be as well versed in the market or negations of real estate as your broker but you will feel much better about WHY you are making the decisions you are.
Much like a doctor warns you of the hazards of eating fatty foods or not sleeping enough your broker should educate you on the benefits and negatives of all deal points.

Some Quick Pointers:

• As tenant are you paying “CAM charges” or “CAM pass-throughs.”  If you answered yes it might be worth discussing with your broker.  These charges are “pass-throughs” that the landlord charges above the base year, while common practice there are ways as a tenant to reduce your exposure.
• Are you a tenant who’s lease is up for renewal in 2009-2010?  Right now the going amount of free rent for a office tenant committing to a 5+ year lease is 2-6 months.  Properties and Owners differ on this lease incentive.
• Again, if you are a tenant up for renewal most landlords are willing to commit new tenant improvement (TI) dollars to keep you.  If you don’t ask, you won’t receive.

This is a true story.  I got fired by a client yesterday.  I don’t get fired by clients often.  In fact, I can only remember a handful of times, when I have been fired as a lawyer over the past 18 years of my law career.

Getting fired yesterday was a blessing.

Here is why.  In a nutshell, I was never going to please this client.  He wanted me to tell him that the law is something different than what it actually is. 

I don’t tell my clients what they WANT to hear.  I tell them what they NEED to hear.

Lesson #1-  You are not going to please every client or customer.  So, don’t try.

Long story short, my client did not like the bad news that I delivered.  This client came to me for legal documents to complete transactions that  are generally prohibited by Indiana law.  When I explained to him that he could not do what he wanted to do, he became very frustrated.  He was disappointed that his lawyer, which was me until yesterday, would not sanction and approve his business model.  He never expected that his lawyer would discourage him from a business model that he had already spent thousands and thousands of dollars creating.  In fact, after I first met him and delivered the bad news a few months ago, he spent hours and hours on the Internet trying to prove me wrong.  He found several websites of other companies offering to do the same unlawful business that he wants to do.  So, he found it very hard to accept my advice.  Even after I printed and gave him sections of the Indiana Code that clearly prohibit his business model, he remained in disbelief.

If you are a professional services provider, your clients must have faith in you.  If they do not trust or have faith in you, they will ignore your advice or not follow it religiously.  If they do not follow your advice, they are, in essence, paying you for the privilege of ignoring your advice.  They can ignore your advice, all on their own.  If they are not accepting your advice and counsel, they are paying you for nothing.  There is no good reason for them to pay you for nothing.  That is simply a waste of their money.  So, you either need to establish a higher level of trust or terminate the relationship.

Lesson#2-  If you can’t please a client or customer, end the relationship on good terms- early.

If you do have a client or customer whom you cannot please, end the relationship on good terms now.  Don’t struggle to try to fix a broken business relationship.  There are plenty of customers and clients who need good advice, other services and products.  This is a variation of the old 80-20 rule.  80% of your problems come from 20% of your “bottom” customers.  While 80% of your profits come from 20% of your “top” customers.  Spend your time and energy on the top 20% of your customer-base.  If you spend your time and energy on the customers whom you will never please, you are doing a disservice to your best customers, that difficult customer, your employees, your business partners, and yourself.  Let the bad customers go, and add to the number and quality of your top 20% customers.

Let that difficult customer go to your competition.  You will be happier and more profitable, and your customers will be happier.

To finish my story about getting fired, I met with the client and ended the relationship on good terms.  I got paid in full for my time, and returned my client’s file to him.  I wished him the best of luck and encouraged him to reevaluate his position.  Had he asked, I would’ve helped him find another lawyer.  In fact, I spent 15 – 20 minutes with him, explaining once again that the law does not support his position.  I gave him specific examples of other cases for other clients, and even suggested that he go talk to some other lawyer-experts in this field.  I even offered to arrange a phone call with local experts, who were the chief governmental officers in charge of this area of the law.  They happen to be personal friends of mine, and I was willing to arrange private meetings with these lawyer-experts to help the client.  All to no avail, because the client is 100% committed to pursuing a plan and business model that poses significant risks to him and his business.  He is a client who cannot be pleased, and he would not remember all the efforts I made to keep him out of trouble.  The minute he gets in legal trouble, he will develop selective memory, and blame me for his refusal to follow my good legal advise.   Who needs that?

It was a blessing to be fired by that client yesterday.  I feel bad that the client is making a bad decision, but I did the right thing.  The client should have more, not less, confidence in me, but he doesn’t care about that.  He is not searching for good advice or a trustworthy advisor.  He is searching for legal confirmation that he can do whatever he wants to do.  That’s not the type of client I want to serve.  So, it is best that the relationship ended.

Can you apply these lessons to your business?  Do any of you have customers or clients whom you need to fire?  Let me hear about it.  Add a comment to this post and tell us your story.

Question from One of Matt’s Readers

“I am a landlord with several properties. I’ve been having a problem with a particular small claims court judge. He always want to put off rendering a decision on a cases. It takes two to three weeks to get a decision on any type of damage hearing. When I do receive the decision in the mail the amount awarded is always about half of what I asked for, with no explanation. I take meticulous records and proof to court and have everything documented. I’m always surprised when he doesn’t make a decision right there. Is the judge required to explain why he disallowed part of my damages. Is this something I should appeal? On what grounds?

or am I throwing good money after bad?”

Matt’s Answer

In Marion County, Indiana, there are nine small claims courts. You can appeal judgments from these nine courts to the Marion Superior Court on any grounds.  Actually, you don’t need a reason to appeal.  So, one option is for you to obtain your ejectment in the small claims court and then appeal the adverse monetary judgment to the Marion Superior Court. That will be a longer process, however. That is one option.

Another option is to avoid the small claims courts completely and file all of your lawsuits in Marion Superior Court. That is a slower and more complicated process, however. My law firm had a client who experienced the same troubles that you are experiencing. That client, out of pure frustration, filed all its lawsuits in Marion Superior Court. It costs more money and often requires a lawyer’s help.  That is a second option.

A third option would be to ask the judge for a few minutes of her time to discuss her court procedures in private. You cannot talk about a specific case in private with a judge, but a good judge would be receptive to a general discussion about her courtroom procedures and the evidence she requires. I would try to make that overture. That might not work, but it is probably worth a try.

A fourth option might be to change the way in which you present your case. If you do not provide the court with a one-page summary of all your damages, you should start doing so. I would label the summary as an exhibit and formally introduce it into evidence. I would make a “big deal” out of your summary of damages. It should be typed, include a title, and look like a formal document. Make it a serious effort.

Here’s yet another suggestion… file a motion to correct error or a motion to reconsider after your next inadequate judgment award. Describe why the court erred and provide an itemized damages calculation. There is not a formal means by which the court in small claims cases can consider a motion to correct error or motion to reconsider, but I would still give it a shot. If you try this, make sure you file this document soon after you get your judgment.

Another option is to simply keep doing what you’re doing. Frankly it is not unusual to wait two or three weeks to get a decision out of any judge in any court in any county in the state. So, I’m not surprised or alarmed that it is taking some time for you to get your judgments.

As a final thought, it might worth trying to bring an attorney to your next case. Judges tend to treat litigants differently when a lawyer is present. After that one case, you might find that the judge treats you differently.

I have given you several suggestions. You might experiment with one, two or all of these. Unfortunately, there is no single, absolute and perfect solution. It is frustrating when courts ignore the law and the facts. It is even more frustrating, when it seems that a court has its own agenda. Please be patient and diligent. Persistence helps as well. Keep trying, and keep fighting for a just result in your cases.  For your own good, assume that it is your fault that the judgments are wrong.  Assume that you could communicate your position better. In other words, don’t blame the judge for hearing you wrong. Try speaking clearer.  Present a better case. You may be perfectly right and you may be doing a good job of presenting your case, but assume you could do better. You might find that a better articulated and presented case will serve you well.

Good luck.

As the costs of litigating disputes continue to increase, litigants are increasingly settling their disputes through arbitration. Arbitration is a process in which a neutral third person (arbitrator) or panel, usually of three persons, considers the facts and arguments presented by the parties and then renders a decision. By utilizing arbitration, litigants can avoid trial, and the lengthy and expensive process of getting to trial. Arbitration usually results in a quicker decision than could be had by going to court. After the arbitrator renders a decision, that decision can be enforced by the courts. However, the courts cannot hear an appeal of an arbitration decision, except in the case fraud.

Arbitration is often preferable for the plaintiff who wants quick redress for the harm he or she has suffered, but defendants may prefer the longer and slower processes of trial and appeal in the courts. The rules of evidence in arbitration differ from those in trial. There are other differences between the two processes. Consequently, before a party agrees to submit to arbitration, thereby waiving the right to trial, careful consideration should be made as to which process is more likely to yield the better result.

How do parties choose arbitration over trial? They simply agree to arbitrate, usually in a written agreement. Written agreements to submit a dispute to arbitration can be signed before or after a dispute arises. So, for example, an employment agreement might include a provision requiring an employee to submit a wage dispute to arbitration. Nearly any agreement can contain an arbitration provision. Agreements can even be written to require mandatory arbitration only if requested by one but not the other party to the agreement.

Whether arbitration is right for you depends on a number of factors particular to your circumstances. However, all parties to an agreement in which significant disputes might arise should consider whether arbitration is a preferable alternative to resolving those potential disputes.

Question for Matt-

“Matt-

I am in litigation with a company I had a 3 year non-compete. They litigate many of their former dealers. It has been almost 4 years since I left, and I have one the preliminary injunction hearing in December. My attorney now wants $50,000 up front to continue the case, my small growing business is struggling because of the suit. I am worried about the small amount of assets I have left – I don’t think its possible for me to fight the case this summer – when its slatted for trial. If I fight, if possible, I risk all I have, but if I don’t – I am in the same boat.

I can’t get a straight answer from my attorney about if I loose, although she is great about fighting the case.

Any help?

CM”

Matt’s answer-

First of all, your lawyer stinks at her job!

If she can’t help you understand your case, the law governing your case, your options and the costs-benefits of your options, then she is doing a horrible job.  A lawyer is first and foremost an educator.  We TEACH our clients what the law is.  We TEACH judges what the law is or should be.  And we TEACH juries what the facts of a case are and how they mesh with the law.

Good lawyers even TEACH opposing counsel about the strengths and weakness of a case or what the controlling law is, as part of a lawyer’s advocacy for the client.

If you can’t get basic guidance from your lawyer, you have to question everything she does.  TEACHING is job #1 for a lawyer.  If she can’t TEACH, she can’t “lawyer.” 

How is your lawyer going to explain your case to a judge or jury, if she can’t even explain it to you?

Fire your lawyer and find one who can communicate well enough to do the job!

As to your particular covenant not to compete, I would need to read it.  I’ve enforced many covenants, and I’ve defeated many covenants here in Indiana.  Each case is different, as the facts and the contracts differ from case to case.  Also, I am unsure of where you live or what state’s law will control.  In some states, restrictive covenants are harder to enforce.  So, I would need more details.  Sorry, but that’s an honest answer.

I think you might start your analysis with getting a second opinion from a new lawyer!

You can also read Are Covenants Not To Compete Really Enforceable?  That’s a blog I posted here several weeks ago.

Best of luck!

Stay out of court, because courts often make bad decisions that can have enormous impact on your business, your personal life and your finances.  If you stay out of court, you increase your chances of controlling your own fate.  If you let a judge decide, you have no control.

One of my law partners has a great expression about clients who get themselves entangled in lawsuits:

“When a client has to file a lawsuit or gets sued, he has already lost.”

What’s that mean?

It means lawsuits cost.  They cost you or your business:

• Time spent in the courtroom, in depositions, reading documents, talking to your lawyer, in mediation, reading court documents, searching for evidence, etc.
• Money for attorneys’ fees, expert witness fees, photocopies, travel, etc.
• Opportunities to make money elsewhere doing other things, to grow your business, or to take personal time to be with family and friends.
• Your health.  Lawsuits are stressful.  The only thing more stressful than getting sued is having to file a lawsuit.  Lawsuits are fun for lawyers.  I love them, from a professional vantage point.  I get to exhibit and sharpen my advocacy and strategy skills, but lawsuits are no fun for my clients.
• Goodwill or reputation.  Getting sued can hurt the image people have of your business or you.  The newspapers rarely report stories accurately.  Allegations and even rumors are often reported as facts.  People who really, truly know you and your ethos will be unaffected.  Everyone else,  including your customers, vendors and potential customers, will develop doubt in you to some degree.

A good lawyer-friend of mine just got a horrible ruling from a judge in a divorce case.  The judge was wrong and should be appealed, but at what cost to the client?  The judge robbed a father of all time with his children in a visitation ruling.  The father in the case is not a bad guy at all, but the judge, for whatever reason, decided that the man should no longer see his own children. 

Amazing isn’t it?  How can one human being exercise that much power over another human being.  This father is dying inside, because he no longer can see the children he loves so much.  It’s very sad, and that judge should be ashamed of himself.

In a divorce case, there is not much you can do in advance to avoid a divorce lawsuit.  Save your marriage, if you can.  Or, don’t marry THAT woman in the first place.  Ladies, don’t marry THAT man!  That is the only lawsuit prevention available in a divorce context.

But what about your business affairs?

Do you take these preventative measures:

• Meet with your lawyer when you are unsure of your rights?
• Meet with your CPA, lawyer and insurance agent at least once every year?
• Have your lawyer draft or review all your contracts?
• Have your lawyer develop an asset protection plan?
• Use limited liability entities properly to create a “corporate shield?”
• Train your staff on a regular basis?
• Have processes and procedures developed into an operations manual?
• Properly use insurance to transfer liability risks away from you or your business?
• Etc.

If you answered “no” to any of these questions, then it’s time to go see your lawyer.