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?

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.

Have the entrepreneurial bug?

Have you been considering launching a new business? You probably are wondering if this is a good time to take the leap. Business ownership is a lifestyle choice. Are you needing to change your lifestyle to achieve your personal or professional goals? People start businesses at all phases of life. According to Global Entrepreneurship Monitor, new business were started or operated by:

  • 6% of all adults 18-24 years
  • 18% of all adults 25-54 years
  • 6% of all adults 55-64 years

More businesses are started by men, but the gap is decreasing. While only 80% of the U.S. entrepreneurs are women, they make up the majority of new entrepreneurs in the age 55-64 group. If you offer a service to startup businesses, you should focus on this target market. Common reasons women launch a business at this phase of life are second careers after raising a family and a desire to get out of the rat race in favor of more control over career, quality of life and a retirement income. The competing family and financial demands are less in their late 50’s and early 60’s. Confidence in entrepreneurial ability is greater for women at this age as well.

Your first step towards entrepreneurship should be to prepare a business plan. This will guide you as you launch the new business and help provide targets and benchmarks to measure progress. Consulting with a business attorney can help you identify steps you will need to take for regulatory compliance, potential risks and mitigation options, and alternatives for business structure. Armed with this information, you can create a realistic business plan with appropriate costs and timelines.

 

Basic differences between a Franchise and a License Agreement

Franchise

License

Elements A Franchise, at its very basic state, has these elements:

  •   Common   Brand
  •   Common   Operating System AND
  •   Payment   of either an initial fee or ongoing fees from Franchisee to Franchisor
A License agreement is usually missing one of the Franchise   elements. The most common form of  a   license agreement has the following elements:

  •   Common   Brand and/or
  •   Payment   of a fee to Licensor
Agreement Typical Agreements include:

  •   Training
  •   On-going   Mentoring
  •   Technical   Advice from Franchisee
License agreements do not get much ongoing support from licensor
Relationship Close Relationship between Franchisor/Franchisee Loose relationship with minimal communication
TM/Logo and Territory Franchisee has the rights to use the Trademark and/or logo of parent   company (Franchisor) and are typically given territorial rights Licensee is not given the right to use the parent company   Trademark or logo; they are expected to market their own brand and build   their own presence/identity in the marketplace.

Where do I file my d/b/a?

If you own a business and are using a trade name (doing business under an assumed name, commonly known as “d/b/a” or sole proprietorship) or if you are conducting business as partners, New York General Business Law Section 130 requires you to file for a Certificate of Assumed Name.

If you have a sole proprietorship or partnership and need to file for a Certificate of Assumed Name, you must file for a certificate in each county in which the business is conducted or transacted. You must provide the trade name, the name(s) of the person(s) conducting the business, along with the residence address and age of any person less than eighteen years of age.

However, if the company that uses the trade name is a corporation, limited partnership or limited liability company, you must file for the Certificate of Assumed Name with the New York Department of State. The forms for this can be found at the NYDOS website at http://www.dos.ny.gov/corps/index.html.