How can I protect my personal assets when I run a business?
There are several strategies to protect personal assets when running a business. They include:
- Put your business in a separate entity like a corporation, limited liability company or limited partnership. An owner who follows the rules in using these entities and does not engage in personal misconduct normally is not personally responsible for the company’s debts or liabilities (an exception is general partners of limited partnerships, who are personally liable for debts of the partnership).
- Don't give personal guarantees. Organizations you do business with (like banks or landlords) may ask for personal guarantees. If you give a personal guarantee, be aware that if the entity does not pay you will be personally liable, and the corporation or other entity will not shield you from this.
- Have your contracts protect you. Personal liability can be limited or even eliminated by terms in your company’s contracts or in your company’s sales invoice and purchase order forms. A lawyer can prepare language to put in your business documents to reduce the risk of personal liability.
- Have proper insurance. This helps assure the business will have enough money to pay any debt or liability so creditors won't need to go after the personal assets of the owner(s).
- Other methods. There are other ways to protect your personal assets when you run a business, including transferring personal assets to your children or other beneficiaries, setting up a retirement plan creditors can’t reach, using certain kinds of trusts and using family limited partnerships to prevent creditors from reaching your personal assets. These strategies for protecting personal assets can be very complicated and have significant tax and legal consequences, so it is especially vital to seek legal assistance when considering them.
What should I do if a customer won't pay?
Some ways to improve your business’s ability to collect debts and improve the chances of winning if court action is needed are:
- Keep good account records of payment history. This reduces the customer’s power to claim they paid you already. And in a court action, your account records can be vital to show the court how much is owed.
- Follow up quickly on past due amounts. When a customer doesn’t pay after one or two requests, or misses a promised payment, be prompt in turning the debt over to your attorney or collection agency. The longer you wait, the less likely you are to get paid. Also, there are statutes of limitations on collecting old debts.
- Keep records of your collection efforts. Keep notes of your phone calls with the customer and copies of any letters you send. These records may be proof if court action is needed. Also, make a record whenever the customer promises you they will pay. A promise to pay is a re-affirmation of the debt, which reduces some defenses the customer can try to raise later.
- Seek legal assistance for debts that you want to pursue aggressively.
What is mediation?
Mediation is a process using a neutral person (the "mediator") to help explore options and communicate. The mediator does not make a binding decision for the parties, but instead helps the parties reach a solution that is acceptable to both sides. The mediator can talk directly to both parties, discuss the matter with just one side in the room at a time if the parties are particularly hostile to each other, suggest ideas for settlement, and do whatever else he or she feels will bring the dispute to a satisfactory end.
What is arbitration?
Arbitration is another way to resolve disputes without going to court. In arbitration, there is a neutral third person (the "arbitrator") who listens to both sides state their case. But unlike a mediator, an arbitrator makes a decision that is binding on the parties.
I am interested in buying a business. What are some of the legal issues I need to consider?
Some key legal issues to consider when you buy or sell a business are:
- Payment terms and financing.
- What the sale includes and "Due Diligence".
- How the deal will be structured, whether as a sale of assets like equipment and property, or a sale of shares of the company’s stock, units of a limited liability company, or interests in a limited partnership.
- Contracts in good standing. Another legal issue is making sure the business’s leases, loans and other contracts are in good standing.
- Compliance with "bulk sale" laws. These laws provide notice to creditors of the business and the public about a proposed sale. This lets creditors make their claim and get paid before a sale is completed. If bulk sale notices are given properly, the buyer is protected against liability to creditors of the seller.
- Non-compete provision. These are often part of a business sales agreement, since buyers want to make sure the seller doesn’t quickly open a similar business nearby and deprive the buyer of the benefit of what he or she bought. To be enforceable in court, the restrictions in a provision not to compete must be limited to a narrow scope of activity, in a limited geographic area, and for a limited length of time.
What is the purpose of a fictitious business name?
A fictitious business name or "doing business as," also known as a DBA, gives business owners an inexpensive method of gaining the legal right to operate in a name other than their own. It protects the public, and it extends legal protections and privileges to business owners.
What are registered agent services?
An agent for service of process (also known as the registered agent) is the person or company designated to accept service of process on behalf of the limited liability company. The defendant must be "served" with court papers, which give the defendant notice, before a lawsuit can have legal effect.
What is dissolution of a company?
In law, dissolution has multiple meanings. Dissolution is the last stage of liquidation, the process by which a company (or part of a company) is brought to an end, and the assets and property of the company redistributed.
When Do I Need to File for Foreign Qualification?
There is a physical presence (e.g., office space or retail store) in the state.
You often conduct face-to-face (not just email/phone/Skype) meetings with clients in the state.
A substantial chunk of your company’s revenue come from another state.
If any of your employees work in another state.