4 posts tagged “business attorney”
Hi All,
Please go to my new blog post here: About my Disclaimer…(a letter to Uncle Frank)…
I hope you find your way over there to read and post a comment...
A few questions to ponder…
Do you need a short disclaimer on your site?
Could someone act on your information and decide to sue you?
Do you need professional liability insurance in your business, we’ll be discussing this more…
Note: To leave a embedded hyperlink on Wordpress , type
<A HREF=”http://www.yourlink.com”>Your link words</a>
This is very basic HTML and one that you need to just commit
to memory, you will use it across the Internet…
Carpe Diem, Rob
Is Your Corporation Protecting Your Assets?
Protect Your Assets from the Envious Hordes…
Hi All,
Six days and counting till the CorporateVeil Pro system test flight!!! (starts Monday July 7)
Tim Birch asked a good question on my last post about what I meant by "border-line" activities and whether I was referring to adult sites, online gambling, etc? My answer:
"Border-line criminal" would be things like borrowing money in the corporations name that you know you probably can't pay back, getting it into your personal name, and then having the corporation go bankrupt and trying to keep the borrowed money, or taking on a contract that you almost certainly can't fulfill on and causing great harm to another person or company...
I am not talking specifically about the actual type of business, as long as an adult site is run within the legal limits, then it can be protected. I think on-line gambling is pretty illegal in the US at present, and I don't know what a "begging site" is. I am talking mainly about the types of activities that the owner might be engaged in to try and defraud someone."
Here is a bit more explanation...
As an owner, incorporation gives your personal assets a layer of protection (often called “the corporate veil”), but this is not 100% iron-clad protection. This is also referred to as "limited liability" in Legalese.
In some circumstances, courts will rule that a corporation doesn't really exist and that its owners should not be shielded from personal liability. This is called “piercing the corporate veil”. Your personal assets are still at risk if you:
□ personally injure someone; (you need Liability insurance*-see note below)
□ personally guarantee a bank loan or other debt which is not repaid;
□ fail to deposit payroll taxes withheld from your employees’ paychecks; (the IRS has no sense of humor)
□ do anything intentionally fraudulent or illegal that causes harm; or
□ fail to follow routine “corporate formalities”.
This last item is the focus of my step-by-step system called CorporateVeil ProTM. This is the one that traps many totally honest business people and can cause them to lose their asset protection. Their major sin is that they are too busy and pre-occupied with their business, and they never learned the routine tasks of operating a corporation “by the rules”.
Although it might seem opposite, small businesses are at the most risk of engaging in these behaviors that can cause the veil to be pierced. When the owner(s) are the same people that are acting as the day-to-day executive(s), or where close relationships exist between the owners, it becomes easier to start acting informally and this is when the line can be crossed that puts you in danger of losing your personal asset protection,
The three major corporate formalities that are often ignored by small business owners:
□ co-mingling of corporate and personal assets and records;
□ signing corporate documents incorrectly;
□ failure to maintain proper corporate documentation.
These often ignored items are addressed in my system, and I will walk you step-by-step through the requirements as I understand them (you should of course consult an attorney as to your specific situation, and laws may vary from state to state that I am not aware of. Do not consider the information I am giving you to be legal advice).
*Note on Liability Insurance
Incorporating and observing the corporate formalities helps protect your personal assets from business events gone wrong. But, your corporation is still at risk from business lawsuits and claims. A solid business liability insurance policy guards your corporate assets and can protect you against many of the risks of doing business. For example, if you personally injure someone while doing business for the corporation, say by causing a car accident, liability insurance will usually kick in and you won’t have to use corporate or personal assets. You also need to have adequate personal liability insurance as another level of protection in most cases.
You should talk to a Business Insurance Agent or better yet an unbiased Business Insurance consultant to ensure that you have the proper coverage for your business and that there are no gaps. I use Sonya Lenzo at www.sonyamlenzo.com to demystify my business insurance and I highly recommend her services. There will be special bonus coming your way as part of the CorporateVeil Pro program specifically dealing with business insurance!
That's all for now...
Rob Northrup
Is Your Corporation Protecting You?
PS: Tomorrow I will be sending everyone that I know of who is in the Test Flight a short questionaire and asking you to respond. Please be looking for it, I will also post on this blog with an explanation of the simple questions and my reasons for asking. Thanks in advance, the secret batcave is getting a fresh coat of paint right now and is almost ready for us to move in on Monday!
Hi all,
In one of my earlier posts, "Why did you start your corporation?", I ended with the comment
...in order to get the personal liability protection from your corporation there are VERY SPECIFIC THINGS that you need to be doing in order to maintain this "corporate veil" of protection?"
As a reminder, see the disclaimer at the bottom of this post. Now, to answer the question...
Corporations call the people who own the business "shareholders" or "owners". The shareholders elect "directors" who control the strategic direction of the corporation, and the directors also hire the "officers" who run the day-to-day business. The President/CEO, Vice President, Secretary and Treasurer are the typical officers.
When you start your corporation, there are some papers which are filed with the state during the Incorporation and some tax forms to get you ID numbers with the fed and state tax authorities. These are called "external records" since you send them out if the corporation, and every year you file an annual renewal with your state, as well as all the required tax forms and deposits.
There are many other records which are just maintained in the files of the corporation, and they are kept within the corporate files to document various corporate decisions. These are called the "internal records". One of these internal records is the Corporate Bylaws, which describes the rules for the corporation. It is just like the rules for a board game, it tells you when the shareholders will meet, and what they do. It lays down the rules for electing the directors, and describes the rules that the board will follow in decision making. And the Bylaws describe how the Bylaws can be changed. This is an important document.
In movies like Wall Street and Other Peoples Money, there are battles waged in the boardroom that are based on these corporate Bylaws, (in addition to SEC regulations which govern public companies which are outside of the scope of my information).
In a small corporation, there might be only one owner that owns 100% of the shares of the stock. In this case, the sole shareholder is often also the sole Director, and appoints him or herself to fill the roles of all the officers. They are even the Janitor, they clean up when they are done and everyone else has gone home. So, there is one person filling all three of these roles--shareholder, director and officer.
There are important differences in the way that each of these differnent roles needs to make and document decisions. Since it seems silly to have a meeting with yourself, and fill out paperwork documenting a decision reached and voted on by a single person, this is often neglected. This is potentially a multi-million dollar mistake--- that's $1,000,000's. [And that's a whole lot more than my product to help the business owner get their records in order-- www.corporateveilpro.com ]
In addition to documenting decisions, there are usually requirements for an annual Shareholders meeting, and an annual Directors meeting. Notifications of the date and time for these meetings needs to follow certain rules, and the agenda and topics discussed during the meeting need to be documented in a proper way. This is all usually covered in the Bylaws.
There are other things that need to be done, and it can be quite confusing and it can easily cost $2500-5000 for a small businesss that has been lax in this area for several years to go to an attorney and get his records ship-shape.
My new product CorporateVeil Pro, is getting ready for a Test Flight starting July 7. I will be releasing this system in a step-by-step manner as an eWorkshop, Each Monday, I release a piece of the puzzle, in a clear and concise way for the busy business owner, both written and audi versions...At the end of the workshop, you'll be ready for a brief meeting with your attorney to verify that you are ship-shape for your specific situation...
Tomorrow, I'll explore what can happen when you ignore these record keeping functions?
Rob Northrup
Is Your Corporation Protecting You?
IMPORTANT DISCLAIMER: As a reminder, I am not dispensing legal advice, you should always consult a lawyer about your specific situation. You need to have a lawyer if you have a business. I can save you time by educating you about specific terminology and general requirements, saving you many hours with your lawyer to complete these important tasks.
A few days ago, Jennifer "Small Closet" Skinner asked a great question...whether it was possible, or even advisable to start a corporation oneself without a lawyer?
First, is it possible to incorporate yourself without an attorney?
Yes. I did it yesterday here in Georgia on-line.
What to Name the Corporation?
The longest part of the whole procedure was deciding on a corporate name. I wanted to be sure that I could get the relevant websites. I decided on Basecamp Publishing Inc. and registered BasecampPublishing.com and BasecampPublishing.net, plus CorporateBasecamp.com and .net for a grand total of under $35 on godaddy (usingy coupon code OYH3 to get the $6.95 special price per year for the .com domain names.)
Which Corporate Structure: S corp or LLC?
I already knew I wanted to be an S corp (as opposed to an LLC). This is not legal advice, you need to research it yourself. Tip: Don't believe anything you read on a blog on the Internet unless you have checked it yourself.
My research led me to understand that the negatives for a S corp (vs LLC) are:
- S corp requires a bit more more corporate formality-- but not too bad especially with my package coming soon (Corporate Veil Pro) which demystifies the record keeping process;
- S corps can't have more than 100 shareholders (doesn't bother me) and
- S corp profits need to be distributed according to the percentage of ownership (I own 100%, this doesn't bother me).
The biggest drawback with an LLC is are that you have to pay payroll taxes on all of the corporate profits, not just on salaries and wages. This can be a significant amount of additional taxes that you pay with an LLC and was the main reason I went with the S corp. I am also already familiar with all the requirements for an S corp and I know how to handle them. It is not too big of a deal, once you understand the rules and have an easy to use system in place to make sure you are following them (the purpose of my upcoming product Corporate Veil Pro, sign up for notification and a special offer when it is available).
Once The Name and Structure Were Decided, I bought my "Inc." in 10 minutes!
It took ten minutes on-line with the GA Secratary of State and I charged the $100 registration fee to my credit card. I had to fill in a form to tell them the name of my corporation, who was incorporating it (me), the legal address, how many shares of stock were authorized, and my official Registered Agent (me again).
After hitting SUBMIT, I got the ARTICLES OF INCORPORATION back approved with a receipt in just a few minutes.
I was now the proud owner of a brand spankin' new corporation! One with an unlimited future that I will create and control...Now on to a few housekeeping matters, I got an Federal Employee Identification Number (EIN, it's like a Social Security number for your business) using the SS-4 form. I called and got the EIN over the phone to eliminate a wait for the paperwork to be mailed back.
The Gavel Drops... Initial Meetings of Shareholders and Directors
I also held my first shareholders meeting last night and authorized the Bylaws and elected myself as a director, and held my first directors meeting, and appointed myself President, and Treasurer. The board authorized the President to take care of the day-to-day operation of the company and created a resolution to open a bank account and deposit the initial equity of $500 into it. We (I) also elected to become an S corp, and I filled out the 2553 form electing this status. Sounds like a lot, it isn't. Total time expended less than two hours- start to finish.
I still had time last night to fix my website, and also to open my aweber account and put the opt-in form on the website. I would like for everyone to go over to www.corporateveilpro.com and opt-in to my list. That way I can be sure it is working right. You need to reply to the confirmation email to be added. I thank you in advance for opting in...
Today, I used my receipt from the Secretary of State declaring me to be an actual, honest to goodness corporation to open my corporate checking account, and to secure a Post Office box in the company's name. I'm now open for business.
Finally, Is it advisable to start a business without consulting an attorney?
Back to Jennifer's original question which I am not going to answer.
It's up to each person to decide for themselves. I do think everyone should have an attorney as discussed yesterday. You don't have to have them fill out the forms for you though if you are comfortable doing it yourself. If you are entering a high-liability area, you might be more inclined to utilize a higher amount of legal advice and there might be better ways to set up stronger asset protection.
There are a lot of books on this subject, I will put together a short list in a future post. And I will get to how to use an attorney effectively still this week, I promise. (Hint: preparation!)
That's all for now,
Rob "Sherpa" Northrup
President, Basecamp Publishing Inc.
