Category: Business Law Blog

Small Business Owners: The Future Might Not Be All That Uncertain

If you are like most small business owners, you find it difficult to plan because your future has more unknowns than your non-business-owning counterparts. You might not know how much your business is worth, when you should sell, where to find the right buyer, how to fetch the best price, or even how much insurance to carry. If you have a family business or operate with a partner, you also have additional layers of both complexity and ambiguity.

When planning for the future, it is easy to become overwhelmed by all that isn’t known. When you step back and evaluate the questions marks that dot the path to your future, however, you might realize that not everything is unknown.

The value of your business is a prime example of a discoverable fact, yet if you are like 98% of the other small businesses in this country, you don’t know the answer.

With less than a half an hour of your time and innovative technology that harnesses the power of big data, you can get an accurate business valuation to illuminate your path. The valuation will give you an understanding of how much your business is worth, how it compares to others in your industry, and the levers that could drive future growth.

According to a Financial Planning Association/CNBC study, over 70% of small business owners have the majority of their wealth tied up in business assets. Knowledge of how much yours is worth brings clarity and insight into retirement and estate planning discussions, succession planning and exit strategies, and insurance protection decisions.

As Lieutenant General and former Deputy Director of the CIA, Vernon Walters, once said, “Uncertainty is the most chilling thing of all.” To reduce the amount of ambiguity you face by determining the value of your largest asset, consider obtaining a business valuation today.

Protect Your Business with a Business “Prenup”

If your business has two or more owners, you need a Buy-Sell Agreement.

A buy-sell agreement is simply a contract between two or more business owners that formally documents contingency plans if a life changing event occurs.  Some people refer to these agreements as “prenups” for business owners. In the agreement, the business owners agree upon what happens to the ownership structure of the company in the event of one owner’s death, divorce, disability, retirement or other life changing events.

Many business owners don’t realize until it is too late the importance of a buy-sell agreement.  For example, if an owner gets divorced, the business may become hostage to the marital dispute. Or if an owner dies, the surviving business owner(s) may inherit heirs for business partners, who care little about whether the business survives.

Without a buy-sell in place, you are opening yourself and your business up for unknown risks.  Protect yourself and your business from the unknown future with a buy-sell agreement. Ensuring that critical events are properly covered is essential to the long-term survival of your business.

Business Owners: There’s No Time Like the Present

The biggest asset for many small business owners is the value of their business and they count on it for retirement funds. However, most of those owners do not actually know the value of the business. How will they know when they can stop working or what to expect in retirement?

Having the information needed to prepare adequately for retirement is just one of the many benefits to a business valuation. Here are several others:

  • Increase value. In life, what is measured improves – this applies equally to business valuation.
  • Capital infusion. To raise money on the right terms you need to know your value.
  • Mergers & Acquisitions. You need certainty on your value to properly negotiate a deal.
  • Exit of an Owner. The more you understand the value, the more likely you will be to reach an amicable split.
  • Too often people guess or estimate and one side or the other losses.
  • Tax strategies. Good tax and financial planning requires beginning with good data. The best plan in the world won’t do you much good if the initial assumptions about value of your assets was wrong.
  • Employee incentive programs. Companies with employee incentive plans may want or need to share value information each year with employees.
  • Insurance planning. Many small businesses do not have adequate insurance coverage. In order to get adequate coverage, you need to know how much value you are covering.

Many business owners avoid valuation because traditionally it has involved an extensive, expensive, and invasive process. Epiphany Law is different and our technology has changed the process. Now we can provide a valuation report that costs a fraction of the traditional model and takes a fraction of the time.

To get started on your business valuation, simply go to https://epiphanylaw.bizequity.com/.

 

Avoid Piercing the Corporate Veil

Piercing the Corporate Veil

A corporate veil is like a “bubble” that will surround an LLC or Corporation and protect its owners from being personally liable for the company’s actions. The veil is normally very secure; however, there are times when that “bubble” can be popped and owners of a company become personal avenues for law suits normally reserved for the LLC or corporation.

Tips to avoid personal liability: Continue reading “Avoid Piercing the Corporate Veil”

Exit Planning: It Takes a Team

Exit Planning is very comprehensive.  Accordingly, several key players must be involved including your financial advisor, CPA, banker, insurance professional, business broker, or investment banker and attorney.  When selecting your team of advisors it is important to identify players that will work well together and will be able to help with any of the issues in a comprehensive plan.  No one person or advisor has the expertise to design a comprehensive plan.

Continue reading “Exit Planning: It Takes a Team”

Exit Planning vs. Succession Planning?

Often times the terms Succession Planning and Exit Planning are used interchangeably but they should not be.  Both Succession Planning and Exit Planning should be addressed as separate plans.

Succession Planning is planning for leadership continuity.  It identifies and fosters the next generation of leaders within a business. It’s a process because it requires a company to develop internal people with the potential to fill key positions within an organization. With a proper Succession Plan, a business will seamlessly transition leadership.

Continue reading “Exit Planning vs. Succession Planning?”

Employee Policies and Procedures: Costly if Not Monitored

There’s been a lot in the news lately about huge settlements that big companies have made for employment law issues. Whether it be for misclassification of workers or violation of wage and overtime laws, businesses continue to pay large fines for not following employment laws. For example, Uber drivers recently filed a class action lawsuit claiming they have been misclassified as independent contractors and are entitled to be reimbursed by Uber for expenses such as gas and vehicle maintenance. This lawsuit was costly. Uber agreed to pay $100 million to settle independent contractor misclassification claims.

Continue reading “Employee Policies and Procedures: Costly if Not Monitored”

Buying and selling real estate. Do I need an attorney?

The process of buying and selling real estate can be complex and it often represents one of the most substantial investments made by an individual or a business. Although using an attorney to assist with the process will not be free, the fees are a minor expense in relation to the significance of the transaction, and is certainly money well spent.

Handling a real estate transaction without an attorney may complicate the process in the short-term and increase risks and expenses long-term.

So, how can an attorney assist you in the buying or selling process?

  • Attorneys are able to negotiate the terms of the real estate purchase agreement to ensure your interests are protected, whether you are buying or selling.
  • Attorneys are able to structure the transaction in a way to minimize present and future tax liability and limit personal liability for matters relating to the real estate.
  • Attorneys are able to prepare agreements between partners in a real estate investment, as well as lease agreements with potential tenants.
  • Attorneys are able to conduct due diligence with respect to the real estate, to help you fully understand what you are buying and identify issues ahead of time. This includes reviewing the title work relevant to the property.
  • Attorneys are able to coordinate with other parties to the transaction, including real estate brokers and title companies, to ensure that the closing happens in a timely and efficient manner.

In summary, if you are buying or selling real estate, a real estate attorney will work for you to ensure you get the most out of your investment.

New Overtime Guidelines – Mitigate Penalties and Employee Lawsuits

We’ve all probably read about the new overtime guidelines for “white collar” workers that the Department of Labor released on May 18, 2016.  But do you know what your business needs to do to be compliant with the new rules by December 1, 2016?  First, you need to understand the new rules. Information about the new rules can be found on the Department of Labor’s website: https://www.dol.gov/WHD/overtime/final2016/faq.htm#8.   These rules can seem overwhelming, but an attorney at Epiphany Law can verify that you are interpreting the law correctly.

Secondly, employers must understand how the changes will affect their current workforce and understand their options if an employee is subject to and does not meet the salary threshold. For example, in response to the new rules, employers way want to make changes to how they pay employees.

To avoid penalties or even worse, a lawsuit, we suggest you consult your Epiphany Law employment attorney before implementing any changes. The attorneys at Epiphany Law will review your classification of employees, overtime procedures and employee handbook to ensure your risk for penalties and employee lawsuits is mitigated.

Wisconsin Worker’s Compensation for Business Owners

Wisconsin Worker’s Compensation for Business Owners

For most Wisconsin employers, the thought of a Worker’s Compensation claim is scary. Trying to keep your business afloat while navigating the countless rules seems impossible. At first glance, the rules appear to be stacked against the business. With the right guidance, however, a Wisconsin worker’s compensation claim should not mean the end of your business. In fact, a claim shouldn’t even be all that scary.

The Wisconsin Department of Workforce Development defines worker’s compensation as a system of no-fault insurance that pays benefits to employees for accidental injuries or diseases related to an employee’s work. Payment to employees is typically prompt, and much more certain then other states. In exchange, employers have limited liability. The question for every business owner then, is why do claims appear to threaten the success of my business? That answer is two part.

First, and the most likely answer, is perception. Because every bad story is told a thousand times more than every good story, the perception is that every worker’s compensation claim shuts down a business. But, perception is not reality in this situation. The second reason is a failure to obtain insurance. Like anything, not having insurance places 100% of the risk on the business. As if that risk weren’t enough, the business can also face penalties and fines. But, once insurance is in place the insurance company assumes nearly all of the risk. So, the first step to not allowing a worker’s compensation claim to shut down your business is obtaining the right insurance.

But, even after obtaining insurance, a business may still be liable to an injured worker. Worker’s compensation insurance does not cover every risk associated with a workplace injury. The two most common uninsured scenarios are (i) safety violations and (ii) an employer’s failure to timely report a fatality or injury.

A safety violation may result in an employer being liable for a 15% increase in compensation, up to a maximum of $15,000.00. Or, in other words, a penalty equal to 15% of the compensation awarded to the injured employee. Safety violations can include a violation of a safety order/statute, failure to use a safety device or failure to obey an established safety rule. Thankfully, by following safety rules, installing safety devices and providing employees with training and guidelines, employers can limit their risk.

An employer’s failure to timely report a work place incident is susceptible for two different penalties. First, an intentional failure to report a work place injury may result in an employer being assessed a penalty of up to $15,000.00 or 200% of the compensation paid to the injured employee. On the other hand, an employer who negligently fails to timely report an injury may be assessed a penalty of 10% of the injured employee’s compensation if the delay in reporting causes an untimely payment. Thankfully an employer’s reporting period is pretty generous. In the event of a work-related fatality, an employer must report said fatality to the Wisconsin Department of Workforce Development and the Worker’s Compensation Division, Madison Office, within 24 hours of the fatality. This doesn’t seem to extreme considering the severity of the triggering event. On the other hand, employers must report a work place injury to their insurance carrier within 7 days of the incident. This time frame also seems very reasonable.

Although this article is not an exhaustive list of the different ways an employer can be susceptible to liability, it does include two of the biggest risks under Wisconsin’s worker’s compensation laws. Even though a business has limited liability, it is still very important to make sure you properly navigate each worker’s compensation claim. The attorneys of Epiphany Law are always happy to help reduce that risk and ensure your future success.