More On Limited Liability Companies' Fiduciary Duty

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Now that we have an Indiana Court of Appeals decision describing the fiduciary duty of an LLC to its members, I almost thought to scratch this post. However, Chicago Business Litigation Lawyer Blog's Respected Law Professor's Insights on Corporate Freeze-Out Litigation may still have some benefit to you.

"In Fairness and Good Faith as a Precept in the Law of Corporations and Other Business Organizations, 36 Loy.U.Chi. L.J. 551 (2005), Murdock addresses the fiduciary duty of good faith and fairness that controlling interests of a business owe to minority interests. Noting that this internal duty is a fairly recent legal phenomenon, he surveys caselaw on the subject from around the country that applies to closely held corporations, public corporations and LLCs. Noting that the Uniform Limited Liability Company Act (ULLCA), a model law adopted by several states, doesn't include language that gives members of an LLC fiduciary duties to one another, he praises Illinois for modifying that language to protect members in the updated Limited Liability Company Act."

Crowdfunding: Disrupting the Old Boys' Network

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By David Drake of the SoHo Loft

Crowdfunding for projects and companies is nothing new. In the online arena, however, it is quite young – in 1997 fans of the UK rock group Marillion ran the first recognized internet crowdfunding campaign, raising $60,000 to underwrite the band’s tour of the US. In the years since, other artists have also reached out to their fan bases and successfully invited supporters to finance their recordings and/or tours. Now, the wider business momentum toward crowdfunding is accelerating intensely and is attracting significant attention because the model disrupts the [finance] supply chain and distribution mechanism our Fortune 1000 companies have built and so vehemently protected for a century.

Imagine 200,000 Red Cross blood donors being able to pay $100 each towards the development of the newest leukemia medication? That’s $20 million of funding sourced by the crowd.

Can you hear the vested interests – "No, that’s not possible. Won’t happen. Humbug!"

Really? Get your head out of the sand.

4Q Business Planning

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Many business owners are paralyzed by uncertainty over what the future may look like for their business and industry. But if you’re the owner of a closely held family business and are thinking about some form of retirement, you should consider taking advantage of a few tax provisions before the end of the year to help you, your company, and your family.

In the next 12 to 24 months, several tax laws will probably change. The lifetime gifting exemption of $5 million per person will likely be reduced and the long-term capital gains tax of 15% increased. In the fourth quarter of 2012, you can take advantage of current rates to start implementing the transition or sale of your closely held family business.

If your net worth is high enough, and your children are going to be taking over your company, then strongly consider using some or all of your $5 million gift exemption this year.

If you are planning to sell the company to someone in your industry and like the buyer and his or her price, talk to your financial adviser about selling before the end of the year to take advantage of the 15% capital gains tax.

Talk to your accountant about completely writing off equipment that you purchased this year, instead of writing it off over 5 to 7 years. If you plan to purchase a large amount of equipment in the next 6 to 12 months, you may want to speed up the process.

If you are thinking about making a loan to a family member, now may be the right time. Minimum interest rates for loans to family members for asset purchases are set by the IRS each month, and currently the rate is 1.4%. As national interest rates increase over the next few years, so will this low interest rate.

Finally, make sure that you have fully funded your tax deductible retirement accounts. This includes 401(k)s, 403(b)s, SEPs, IRAs, and other types of plans. If you just turned 50, the tax deductible amount that you can put away is higher than it was last year.

Before the end of the year, sit down with your business attorney, CPA, and financial adviser to discuss tax and business strategies. A wise man once said, “A good plan today is better than a great plan tomorrow.”

Presented by FreeEnterprise.com - your home for free market news and ideas. The site offers more than headlines - it’s a dynamic conversation about American free enterprise

How Can I Collect Cash From My Customers Quicker?

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Cash is king as they say. Yet, some businesses don’t have aneffective cash collection process in place to make sure that their clients paythem on time. It’s very easy for businesses to become relaxed after the salesagreement is signed. However, when they aren’t collecting cash for goods orservices rendered on time, they are essentially extending credit to theircustomers. Find out how to get paid quickly.
Improve cash collection
All business must have a process in place in which their customersknow the payment terms upfront and the policies that must be followed. Any cashcollection process with lenient terms is a recipe for disaster. As they say, ifyou give an inch, they’ll take a mile. Of course, you don’t want to rub apotential or existing customer the wrong way, but that shouldn’t be a problemif it is clear what the payment terms are upfront.
During the cash collection process, it’s also important to becompletely objective and not let your emotions get the best of you. Calling aclient up screaming will not help you get paid faster. Rather, follow-up withthe client if they haven’t processed payment to make sure they received theinvoice. It’s quite possible that they may have overlooked the invoice andnever meant to delay payment.
If you haven’t tried this in the past, you may want to include anincentive for paying within a certain amount of days. You would be surprised,but even offering as little as a one or two percent discount, can ensure you’repaid on time. You can even take it one step further by charging late fees forthose that don’t pay on time. This strategy is only effective if the late feesare disclosed and communicated to the client upfront. You can even include latepayment fee information on your invoices. Please note that some states havelimits on how much you can charge in late fees.

About BIDaWIZ
BIDaWIZ is an online marketplace where small businesses can obtain professional tax, accounting and financial advice and services from a network of over 750 online CPAs, EAs, CFPs & Tax JDs. BIDaWIZ suite of services include the ability to ask professionals questions for free, find and work with a trusted professional online for a full service engagement, and to subscribe to the premium tax and financial newsletter and knowledge base.

Three Questions Worth Considering Before Opening an International Location

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With 95 percent of the world’s consumers located outside of the United States, expanding your operations outside our borders can be a smart strategy for your business. Can being the operative word.

Your research may reveal a sizable market for your product or service in a foreign country. But before you open your doors in a different country, see how well you can answer these make-or-break questions.

1. Is your local business strong?
Most small business experts recommend achieving success at the local level before shooting for international stars. If you’re not already in business, you might be tempted to start from the ground up in a country with cheaper labor and fewer regulations. If those are your motivators, remember you’ll be doing business in an area with less consumer spending and a completely different culture. With very few exceptions, it’s always safer to start at home.

Some entrepreneurs with struggling businesses will blame their current market. True, a better market for your business may exist beyond our borders. But running your business in a foreign country the same way you do stateside will likely produce the same—if not worse—results. The grass isn’t always greener on the other side of the border. 
2. Do you speak the language and understand the culture?
According to an Escape from America article, the number-one mistake eager foreign-bound entrepreneurs make is failing to speak the language or know the culture. The logic goes like this: If you have English-speaking contacts in a foreign country, those associates can handle contracts, forms, and conversations on your behalf. That means placing a lot of responsibilities on others with no way to verify their work.

Lacking language skills is bad, but neglecting the culture is worse. Assuming your country of choice wants a business run the American way, products advertised the American way, and customer service the American way often means you’ll go home packing the American way. With everything from labor efficiency to government corruption differing, you’ll have difficulty creating a successful business presence without first-hand knowledge of the culture and the language.

3. What will your tax obligation be?
You may figure with all the news about America’s high corporate tax rate, you can open business anywhere and pay a lower corporate rate. You’re partially correct. But, odds are, you’ll be obligated to pay taxes to Uncle Sam and the foreign government. In some instances, the international double taxation burden can make a foreign presence a money pit.

Some small business owners in this situation find relief through the foreign tax credit. However, the tax credit has specific parameters your business must fall within in order to qualify. Find an accountant who specializes in small businesses with foreign presences to ensure your international plan won’t create an overbearing tax burden.

You’ll have myriad other considerations to weigh before you open a foreign location. But answering these will show if you’re on the right track—or if it’s time to turn the train around.

About Business Owner’s Toolkit
With an emphasis on problem-solving dating back to 1995, Business Owner’s Toolkit™ (www.toolkit.com) offers more than 5,000 pages of free cost-cutting tips, step-by-step checklists, real-life case studies, startup advice, and business templates to small business owners and entrepreneurs. The site also offers a monthly newsletter, up-to-date news topics, and Ask Alice!, a column that closely follows industry trends and provides trusted advice to inquiring site visitors.

Protect Your Bargains

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What to do when your partnerwon't honor a contract
Every day in the business world, companies sign contracts,honor their part of the bargain and then discover that the other side isn'tliving up to its end of deal. Most businesspeopleenter into agreements assuming that the other party has the same intention andability to honor the contract.All too often, you learn – the hard way – that integrity andperformance is a one-way street. But you can protect your bargains.
Due diligenceYou should know with whom you're doing business.Long-standing relationships can help, but they are not foolproof. One clientjust discovered that he had been doing business for a few years with someonewho was recently indicted for serious crimes. Even though our client had nothingto do with the alleged felonies, the mere association with a potential felon threatenedto taint our client's business and reputation. Further, the alleged crimes jeopardizedour client's ability to obtain financing, attract investors and operate his companyat the same level of profitability.
Of course, finding out you're in business with allegedcrooks usually happens only in Grisham novels. Still, plenty of entrepreneurslearn all too late that they are doing business with people who don't honordeals or would rather fight than deliver on a bargain. 
But conducting due diligence can weed out potentialproblems. Consider conducting background checks and obtaining financialstatements and references for the other party. Sometimes, we have checked courtrecords and found lawsuits that demonstrated the other side either can't or won'tfulfill their bargains. Likewise, if you talk with people who have dealt withcertain companies, you may discover that the other side enters into deals easilyenough, but then spends all of their time "retrading." That is, oncethey've locked you into a deal, they attempt to renegotiate the terms, instead ofliving up to the bargain.
Spell out your protectionsDraft a contract that not only captures the business terms,but also protects you if the other side does not deliver. The protections canvary. You need provisions that cover the "what ifs" and providemeaningful remedies if the other side defaults. Often, you will want toestablish whether you will go to court or engage in arbitration – each has itspros and cons.
You should also draft a clause entitling you toreimbursement of your attorneys' fees if you prevail. Contrary to popular misconception,you are not automatically entitled to payment of your legal fees if you win. Read more…
Jack Garson is the founder of Garson Claxton LLC and leads the firm’s business and real estate practice groups. Jack serves as a legal advisor for numerous local, regional and national companies, focusing on business transactions, commercial real estate, commercial leasing, and construction law. In addition to providing legal counsel, Jack serves as a strategic advisor and negotiator for many clients, providing guidance on issues such as the growth and sale of businesses, liability and risk reduction, the hiring and retention of key personnel, and protecting and enhancing profitability, as well as negotiating the resolution of complex commerce.

The Business Buying Process in 6 Steps

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According to a recent buyer survey, 60% of online business buyers reported that they “Understood the buying process”, but many of our conversations with SBDC counselors paint a different picture. Our workshop at the ASBDC conference aimed to address the complexities of the buying process and shed insight into buyer expectations to better prepare SBDC centers as they intake aspiring entrepreneurs.

Read our 6 steps to buying a small business that were presented at the conference, and click here , or any of the following links to download our Buyer Tools referenced below.

1. Determine Readiness to Purchase
Are your clients prepared to take on the task of running a business? Consider your client’s income, lifestyle, investment, and risk profile to see if they’re suited for the task.

In gauging client readiness, you might ask:

What do they like/not like to do?

What are their strongest skills? Weaknesses?

What work schedule and environment do they like/not like?

What is my Risk vs. Reward Profile?

Visit our Buyer Tool #1 for additional assessments

2. Help Find the Right Business Type
With the large number of available businesses for sale, it’s no wonder that the selection process can become overwhelming. In evaluating options, consider whether or not the business fits their criteria. Include your client’s experience, interest, price range and long-term goals in the equation. Buyer Tools #2 and #3 can help.
Buyer Tool #2: Business Fit Assessment (Example)
Buyer Tool #3 Independent Business vs. Franchise Choice

3. Create the Right Financing Package
As you’ve seen, adequate financing is a major stumbling block to closing a business-for-sale transaction. Between tapping into personal savings, loan options, or seller financing, there are pros and cons to explore for each. As soon as the buyer contacts a business seller or broker, the seller/broker will want to be sure that the buyer is qualified to close a transaction before sharing any information about the business.

Help your client understand their financing options by doing a quick assessment of their current economic situation.
Visit our Buyer Tool #4: The Purchase Price & Financing Source Relationship 

4. Help Assemble a Team of Experts
Your client already knew to seek advisement by enlisting the services of the SBDC, and now you can help them fill in the services where they’re needed. We advocate Appraisers, Business Brokers, Accountants and Lawyers in addition to SBDC counselors to help aspiring entrepreneurs complete all of the tasks required to purchase a business. Each expert brings different value to the table and will be helpful to create a smooth close.

In helping to evaluate local professionals offering the above services, use this matrix as an example of choosing the right expert for the job:
Visit our Buyer Tool #5: Broker Evaluation Matrix 

5. Narrow Down the Choices
Evaluate each business against specific criteria to help your clients choose wisely. Determine key evaluation elements such as location, purchase price, financing, cash flow, and lifestyle ramifications. Help your client set measurement criteria (Buyer Tool #6 provides an example), but try not to be too analytical while assessing against targets. On the same token, it’s also important to remind your clients to remain objective and not get too emotionally attached to any one opportunity.
Visit our Buyer Tool #6: Business Evaluation (Example) 

6. Close the Deal
Help your client understand what all they need to do as part of the buying process. From making an offer to conducting due diligence to closing the deal, you can assist your client with each step along the way. To help your client determine an appropriate asking price for a business of interest, be sure to access BizBuySell’s valuation product (FREE for SBDC counselors) which shows you comparables based on over 50,000 closed business transactions and 45,000 current businesses for sale, which can be filtered by geography, business category, revenue and net income.

To redeem a free Valuation Reports, visit:
http://www.bizbuysell.com/business-valuation-report/
And enter Promo Code: ASBDCVAL2012


About BizBuySell:
BizBuySell is the Internet's largest and most heavily trafficked business for sale marketplace, with more business for sale listings, more unique users, and more search activity than any other service. BizBuySell also has one of the largest databases of sale comparables for recently sold businesses and one of the industry's leading franchise directories.