Ladies, Stop Giving It Away

Ladies, Stop Giving It Away, by Nancy Roberts, is one of my “best kept secrets.” It is the third book I have read by Nancy and each one teaches lasting lessons about how to improve my business development skills. She is the coach that other coaches turn to for skill development. This book reinforces principles I have heard before, but it also presents the case why some traditional teachings for men do not work well for women. After reading why and applying it to my own experience, I am convinced she has it right. More importantly, she backs up her theory with two critical things:

  1. Empirical evidence and studies, and
  2. Techniques for implementation

This book is a compact portable course that can be immediately implemented to achieve measurable results in your business. An investment of two hours and $30 will take your business to the next level. It is inspiring and empowering, and jam-packed with great information. You’ll be ready to enroll in one or more other programs she offers, and enthusiastic to make the investment in you and your business.

The Importance of Maintaining Good Corporate Records

There are many situations when a business will need to prove its books and records are in proper order.  These include government agency audits, inspections and investigations; financing transactions such as loan, grants and investors; and corporate due diligence involved with mergers, separations, sales and joint ventures.

Here is a list of documents you should keep in one location (usually at your place of business) for access on demand by various agency officials:

  • Certificate/Articles of Incorporation or Organization and filing receipts (certified copy as filed with the relevant Secretary of State), including all filed amendments
  • Bylaws and all amendments
  • “Foreign” Filings (registrations to do business in states other than the state of incorporation)
  • Organizational consents and organizational meeting minutes by the incorporator and initial stockholders and directors that, among other things, appoint initial Board members, adopt the Bylaws, appoint initial officers and authorize any other actions that require formal approval such as issuance of shares to founders
  • Founder Vesting Agreement, voting agreements, shareholder agreements, operating agreements, and any other agreements among owners, voters or key employees
  • Copies of minutes from all Board meetings and stockholder (member) meetings
  • Copies of all Board and stockholder resolutions, adopted either at meetings or by written consents
  • Stock Ledger and Option Ledger listing status and ownership of all shares and options
  • Copies of all issued stock certificates (member unit certificates)
  • IP Assignments (trademark, copyright and patent)
  • Evidence of IP filings/registrations (for any trademarks, copyrights, patents and domain names)
  • All contracts, leases and amendments, including NDAs, non-compete agreements, employment agreements and contractor agreements (fully signed and complete copies)
  • Option or equity incentive grant documentation (including Board approvals)
  • Financial statements, tax records and documents related to value of the company
  • Annual or biennial reports or statements of information filed with the state and any other government agency
  • Appraisals of stock value or key asset/property values
  • Deeds or title documents to important business assets
  • Permits and licenses for operating

Non-compete Agreements Need a Geographic Location

In a lawsuit between an employer and an employee, a non-compete agreement that restricted employees from “working for companies competitive with the employer” and “in locations where they employee marketed or sold products” was not reasonable in geographic scope nor was it defined well enough to be enforced. The court rendered it unenforceable leaving the employer without a remedy. This is one more reminder that non-compete agreements must be reasonable in both time and geographic scope. The guiding principle is the least restriction on the employee’s ability to obtain new job and reasonably necessary to protect the employer’s interest.

It may be a good idea to review your company documents with your attorney to be sure they will be enforceable when you need them.

Failure to maintain your corporate books and records can render you personally liable

The equitable theory of veil piercing, intended to serve as a rectifying mechanism against certain fraud, dishonesty or wrongdoing, is of particular import in the case where the corporate entity has no assets to pay a judgment but the principals do have assets to pay the legal damages awarded by a court. This was recently used by Burberry is its effort to stop a counterfeiter and recover $2.5 million in damages.. Burberry Limited and Burberry USA v. RTC Fashion Inc., d/b/a Designers Imports t/a Fashion58.Com and Asher Horowitz (Index No. 110615/14) (N.Y. Sup. Ct. 2014).

Burberry, believing that an affiliate of the judgment debtor intended to frustrate Burberry’s efforts to collect the $2.5 million judgment against Designers Imports and to ensure that Horowitz maintained continuity in the marketplace, commenced an action in the New York State Supreme Court against both the affiliate RTC Fashion and principal Horowitz. In the state court action, Burberry sought to pierce Designers Imports’ corporate veil in order to hold Horowitz personally liable for the judgment entered in the federal action. Under New York state law, and it is well established in New York that piercing the corporate veil generally “requires a showing that the individual defendants (1) exercised complete dominion and control over the corporation, and (2) used such dominion and control to commit a fraud or wrong against the plaintiff which resulted in injury.” Courts in New York have considered the following factors in determining whether the two-part showing has been met and the corporate veil may be pierced: (i) failure to adhere to corporate formalities; (ii) inadequate capitalization; (iii) commingling of assets; and (iv) use of corporate funds for personal use.

The following facts were important to piercing the corporate veil (there were other facts considered by the court): The principal was the sole shareholder, officer and director of both companies; (2) the corporate entity had no by-laws, no stock transfer ledger, no minutes of its shareholders meetings, and no minutes of its board of directors meetings; (3) the principal’s only meetings were with his accountant on a yearly basis for the purpose of preparing his tax returns; (4) the principal comingled funds by paying personal expenses with company money for his personal use.

The take-away is that is important to properly keep corporate books and records. Don’t forget to do your annual meeting minutes and properly document other major corporate transactions. Failure to do so may result in personal liability and not receiving the protections of the corporate entity.

April 2014 Gallup Pole: 84% of small business owners would do it again

For would-be entrepreneurs, there is always that nagging doubt – am I making the right decision? I hope this statistic will ease your mind: 84% of small business owners would definitely do it again. Reasons given included:

  • Being own boss/independence
  • Job satisfaction/sense of accomplishment
  • Creating employment
  • Financial reward
  • Flexible schedules
  • Working with customers

Biggest challenges:

  • Generating business/marketing
  • Cash flow and credit
  • Government regulations
  • Uncertainty/learning curve
  • Employee issues

Interestingly, the hard work was not a detracting factor. Less than 2% complained about long hours, competition and spending/expenses. Less than 1% complained about taxes, the economy or technology/website challenges.

So, what’s stopping you?

Online reviews or content disparages your brand reputation. How do you decide whether to take countermeasures?

Your first step is to determine if this review or story will natural fade away or is likely to snowball and cause lasting damage to your reputation in the marketplace. You must give the situation a non-emotional evaluation and in light of the fact that the overwhelming majority of online content is never read.

If you decide defensive action is warranted, you may want to consider options such as these:

  1. DIY approach: Asking a social network or web host to remove content that infringes on your IP rights or violates on the site’s terms and conditions relating to defamatory content
  2. Involving a lawyer: A cease and desist demand, injunction, or lawsuit against the writer alleging defamation, unfair competition, breach of contract, copyright or trademark infringement or other legal causes of action

I Recommend Income 180 Conference

Earlier this month, I attended the Income 180 Live Event 2014, with Nancy Roberts and Chris Kenney.  I had two goals for this 2½ day conference: learn how I could do better in conveying the benefits I provide to people so I would have the opportunity to work with more business owners, and secondly, to learn some business building techniques I could convey to my clients to help improve their business and its bottom line.

My opinion: This experience is very affordable and well worth the time investment.  Here are a few highlights of my 3 days:

  1. I now have a better understanding of the psychology of the buying process and how it affects the way potential clients interact with me (and my clients).
  2. I have some techniques my clients and I can immediately use to improve client relationships.
  3.  I learned how to improve my initial consultation with a potential client to make it more customer-centric.
  4. I left energized and re-invigorated- something we all need to have (that fire inside us to do our best work).

The material was presented in an interactive and easy to understand manner.  That is crucial.  Since some of the lessons are taught by an experiential exercise, your understanding goes to a depth you never before felt when you are put in your customer’s shoes.  The lessons will never be forgotten and will forever impact how I see certain situations.

Who will benefit most?  I believe people in a service or consulting type business will have the most profound experience.  However, the experience will benefit any entrepreneur.  Nancy and Chris offer professional coaching in a more personalized basis and I have no doubt this is a sound investment.  Consider this coaching as your “MBA” in profitably operating your own business.  Instead of spending money one time for marketing or pay-per-click advertising, invest in you for a lifelong results and return on investment.  They convey real world, real time experience to teach you how to do it right.  The investment is substantial for private coaching but with real results you’ll earn the cost back in months, not years.  You’ll wonder why you didn’t do it sooner.  myincome180.com

Case Study: Improper Incorporation of a Church

A local group had used an accountant to incorporate a new church. The accountant used a corporate formation service to handle the incorporation process. The non-attorney service prepared a certificate of incorporation under not-for-profit law and filed it with the County Clerk. Several years later, as the church was in the process of leasing space in their church to another church group, it was discovered that the church was not anywhere listed as an entity on the State Corporate records.

The accountant and pastor came to our office to research the matter. Upon receipt of the supposed certificate of incorporation, the issue was immediately apparent to Tracy Jong. Churches that have a place of worship in New York must be incorporated under Religious Corporations Law. Although a document was filed at the County Clerk, it would be ineffective to properly incorporate a church. Certificates of Incorporation for a not for profit corporation can only be filed with the Division of Corporations in Albany. If the not-for-profit is a religious corporation, it cannot have a place of worship in New York to use this procedure.

The accountant and pastor were surprised to learn that the County Clerk takes a fee to file a document, but does not pass on its validity as a legal matter. The County Clerk does not have any obligation to advise a filer that a document is improper; its job is only to file and record the document. After operating several years, the church leadership learned they were not legally incorporated. This affected liability of the church leaders and raised issues with the validity of a contract they planned to make. An entity that did not legally exist could not enter a contract.

Our office quickly prepared the necessary paper work to properly incorporate the church and met with the pastor to outline the procedure they would follow over the next 2-3 weeks. The error would be corrected in about 16 days, in time for the lease to proceed. Properly incorporated, the personal liability of church leaders was no longer an issue.

Not for profits can have complex issues and mistakes may not be discovered until there is a crisis. Working with an experienced attorney can help give you peace of mind that you won’t have with a do-it-yourself or internet service provider. Experience matters.

 

Case Study: Improper Not-for-Profit Formation

A local not-for-profit association had been successfully operating for more than two decades. The existing leadership, ready to retire and to transfer the reigns to a new leadership team to carry on their important mission. Our firm was asked what steps would be necessary to elect new officers and directors.

When we reviewed the books and records, we discovered that the not-for-profit was never actually incorporated. Rather, it had been operating (improperly) under a “d/b/a.” The IRS considered it a private foundation so tax exempt status was valid, but there was no protection from personal liability for the directors. With many professionals on the existing and incoming Board (doctors, lawyers and accountants), this was a serious concern. Our office was able to properly incorporate the organization and discontinue the d/b/a of the founder.

We also assisted the charity with changing its name to expand its mission and core functions, allowing it serve more people in the community.

We were able to walk the new leadership through its organizational meeting and provide materials to teach the directors about their fiduciary responsibilities and liabilities as board members for the not for profit corporation.

We also helped the charity to adopt by laws, a mission statement, key policies to preserve the not-for-profit tax exempt status and to successfully operate under the new leadership.

If you have a not for profit corporation, you should have it reviewed and audited periodically to be sure everything is in order and the charity is in compliance with applicable laws  and regulations. If you uncover unforeseen issues, Tracy Jong Law Firm can guide your group through the process of correcting mistakes and bringing you into full compliance.  We can even give your group’s leaders a class to teach them about their responsibilities and liabilities as directors and officers and how to avoid issues of non-compliance with the rules and regulations governing not for profit organizations.