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business [2018/04/18 15:26] (current)
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 +====== Small Business: Legal Issues ======
 +  * Nonprofit Law and Consultation
 +  * Amy Hereford – JD, PhD
 +  * 6400 Minnesota Ave – Saint Louis, MO 63111
 +  * 314-972-4763 – amyhereford@gmail.com
 +  * (c) www.ahereford.org
 +
 +----
 +
 +===Introduction===
 +  * Research and Planning
 +  * Assemble Resources
 +  * Establish Legal Foundations
 +  * Establish Financial Systems
 +  * Establish Compliance Systems
 +  * Establish Communications & Development
 +  * Find a Site and Begin Operations
 +  * Business Plan – Executive Summary
 +
 +----
 +
 +===Entrepreneurship===
 +  * Rewards
 +    * Profit - Freedom from the limits of standardized pay for standardized work.
 +    * Independence - Freedom from supervision and the rules of bureaucratic organizations.
 +    * Satisfying Way of Life - Freedom from routine, boring, unchallenging jobs.
 +
 +
 +
 +
 +----
 +  * Risks
 +    * Uncertainty of income
 +    * Risk of losing entire investment
 +    * Long hours and hard work
 +    * Lower quality of life until the business gets established
 +    * Complete responsibility
 +
 +
 +
 +
 +----
 +  * Success
 +    * Passion
 +    * Persistence
 +    * High need for achievement
 +    * Willingness to take measured risks
 +    * Confidence and self-reliance
 +    * High energy level
 +    * Desire for responsibility
 +
 +
 +
 +----
 +  * Routes to Small Business
 +    * Startup
 +    * Buyout
 +    * Franchising
 +    * Family Business
 +
 +
 +----
 +  * Ideas for New Businesses
 +    * New Market: Providing customers with a product/ service that is not in their market but already exists elsewhere.
 +    * New Technology: Using a new technical process that provides the basis for new product or service ideas.
 +    * New Benefit: Performing an old function for customers but in a new and improved way.
 +{{ ::​ideas.png?​400 |}}
 +
 +
 +
 +===Business Plan===
 +  * The Mission Statement
 +  * Important dates in beginning the business
 +  * Names and roles of founders, key employees
 +  * Location and description of site
 +  * Description of services
 +  * Funding sources
 +  * Market highlights
 +  * Strategic Development Plan for 1, 3, 5 years
 +
 +
 +
 +-----
 +**Business Plan - Needs Analysis**
 +  * Define Market Segment
 +    * Clearly define client/​customer base
 +    * How many potential clients are there?
 +    * Where are they found?
 +    * What are their characteristics?​
 +  * Identify other players
 +    * Others providing similar services
 +    * Others serving the same client base
 +    * Similar service providers in other regions
 +
 +
 +----
 +**Business Plan – Organization Description**
 +  * Overview of organization’s plan to meet the needs identified above
 +  * Identify goods and services and describe how they will be provided
 +  * Organization and Management
 +    * Board Roles and Responsibilities
 +    * Organizational Chart & Job Descriptions
 +
 +
 +
 +----
 +**Business Plan – Communication and Development**
 +  * Communication
 +    * Create communication plan
 +    * Develop methods of maintaining contact with
 +      * Clients and potential clients
 +      * Grantors and donors and supporters
 +  * Financing
 +    * Create Financing plan
 +    * Identify sources of funding
 +    * Identify development strategies to engage the community
 +
 +
 +
 +----
 +**Business Plan – Financials**
 +  * Financial Statements to Date
 +  * Budget for start-up
 +    * 3 months
 +    * 6 months
 +    * 1 year
 +    * 2 years
 +    * 3 years
 +
 +
 +
 +----
 +**Business Plan – Appendices**
 +  * Resumes of key managers
 +  * List of Services
 +  * Letters of reference
 +  * Details of market studies / needs analysis
 +  * Relevant bibliography
 +  * Legal documents
 +    * Articles, Bylaws, Corporate Minutes
 +    * Copies of leases; Building permits; Contracts
 +    * Licenses, Insurance, etc.
 +  * List of business consultants and professionals
 +
 +
 +
 +----
 +**Budget**
 +^ Account ^ Startup ^ Year I ^ Year II ^
 +|**Income**| . | . | . |
 +| Personal Funds | $5000 | . | . |
 +| Sales | $2000 | $15,000 | $30,000 |
 +|**Expenses**| . | . | . |
 +| Costs and Supplies | $2000 | $5000 |$7000 |
 +| Salary | $5000 | $10,000 | $23,000 |
 +
 +----
 +
 +**Assemble Resources**
 +  * Based on Research and Planning
 +  * Board Members
 +  * Management
 +  * Staff
 +  * Funding & Resources
 +    * Initial
 +    * Development Plan
 +
 +----
 +
 +**Crowdfunding**
 +  * Internet-facilitated fundraising
 +  * Tax Laws still apply
 +  * Charitable Solicitation Laws still apply
 +  * Take account of costs and fees (3-15%)
 +  * Equity, Loan, Gift
 +  * Entrepreneur:​ wider exposure, risk loss of ideas or control
 +  * Investor: many ideas, lack of due diligence
 +
 +
 +
 +==== Establish the Legal Foundations ====
 +  * Increasing burden of inter-related legal regulation
 +  * Cost of these mistakes
 +  * An attorney familiar with nonprofit law is an indispensable help in successfully meeting all these demands
 +    * File with the State: ​
 +      * Articles of Incorporation
 +      * Articles of Organization
 +      * Register a Partnership
 +    * Draft operating document:
 +      * Bylaws
 +      * Operating Agreement
 +      * Partnership Agreement
 +
 +
 +===Forms of Ownership===
 +  * Sole Proprietorship
 +  * Partnerships
 +    * General
 +    * Limited
 +  * Corporations
 +    * Regular Corporation
 +    * Subchapter S Corporation
 +  * Limited Liability Company
 +{{ ::​entities.png?​400 |}}
 +
 +
 +{{ ::​entitiesmatrix.jpg?​400 |}}
 +===Choosing a Form===
 +
 +  * Organizational costs
 +  * Limited versus unlimited liability
 +  * Continuity
 +  * Transferability of ownership
 +  * Management control
 +  * Raising new equity capital
 +  * Income taxes
 +
 +
 +===Sole Proprietor===
 +  * A sole proprietorship is a business owned and operated by one person.
 +  * There is generally no registration or filing fee.
 +  * Liability is unlimited.
 +  * The sole proprietorship is dissolved upon the proprietor’s death.
 +  * Ownership of the company name and assets may be transferred.
 +  * Management freedom is absolute.
 +  * Capital is limited to the proprietor’s personal capital.
 +  * Income from the business is taxed as personal income to the proprietor.
 +
 +
 +
 +
 +==Checklist==
 +  * Business Name
 +    * Decide on a Name
 +    * Research for others using that name
 +    * Consider fictitious name or DBA
 +    * Consider Trademark Registration
 +  * Set up for  ​
 +    * State Sales tax
 +    * Personal State and Federal tax
 +    * Estimated Tax Withholding
 +  * Set up a Finances
 +    * Accounting
 +    * Payment / Creditcard / Invoicing
 +    * Bank accounts
 +    * Arrange for pension
 +  * Obtain all necessary business licenses
 +  * Obtain apppropriate insurance
 +  * Establish relationships with professionals
 +    * Business attorney
 +    * Accountant
 +  * Develop a checklist for ongoing Legal Compliance
 +
 +[[https://​www.sos.mo.gov/​business/​corporations/​forms|MO Secretary of State]]
 +[[https://​www.sos.mo.gov/​CMSImages/​Business/​Step-by-StepGuides/​RegisteringaFictitiousName.pdf|Fictitious Name Registration]]
 +
 +== Liability ==
 +{{ ::​liability3.png?​400 |}}
 +
 +
 +{{ ::​liability.png?​400 |}}
 +
 +
 +{{ ::​liability2.png?​400 |}}
 +
 +
 +
 +
 +
 +===Partnership===
 +  * A partnership is a voluntary association of two or more persons to carry on, as co-owners, a business for profit.
 +  * There is generally no registration or filing fee.
 +  * Liability is unlimited.
 +  * Unless the partnership agreement specifies otherwise, the partnership is dissolved upon withdrawal or death of a partner.
 +  * Transferring ownership requires the consent of all partners.
 +  * A majority vote of partners is required for control.
 +  * Capital is limited by the partners’ ability and desire to contribute.
 +  * Income from the business is taxed as personal income.
 +
 +==Limited Partnership==
 +  * Limited Partners invest in your business but are not otherwise active
 +  * A written certificate must be filed with proper state office.
 +  * Liability is limited to investment for limited partners.
 +  * Withdrawal or death of limited partners does not affect the continuity of the business.
 +  * Limited partners may sell their interest.
 +  * Limited partners are not permitted any involvement in management.
 +  * Limited partners’ limited liability provides a strong inducement in raising capital.
 +  * Income from the business is taxed as personal income.
 +
 +[[https://​www.sos.mo.gov/​business/​corporations/​forms|MO Secretary of State]]
 +
 +
 +==Checklist==
 +  * Name
 +    * Decide on a Name
 +    * Research for others using that name
 +    * Consider fictitious name or DBA
 +    * Consider Trademark Registration
 +  * Set Up Partnership
 +    * Record Partners names, ID#'s, record of ownership
 +    * Set up partnership agreements
 +    * Set up buy/sell - change in partnership interest agreements
 +    * Establish contributions,​ payments, accounting, taxes for partners
 +  * Establish
 +    * Federal Tax ID#
 +    * State Tax ID#
 +    * State Sales Tax ID#
 +    * State Unemployment,​ Withholding Tax ID#
 +  * Apply for required operating permits, licenses, bonds, etc.
 +  * Set up a Finances ​
 +    * Establish appropriate accounting methods (tax year, cash vs. accrual, etc.)
 +    * Set up acceptable bookkeeping system
 +    * Establish expence procedures
 +    * Set up bank / checking accounts
 +  * Purchase Insurance
 +  * Employees
 +    * Personnel procedures / manual
 +    * Establish Payroll procedures
 +  * Establish relationship with professionals
 +    * Bank
 +    * Attorney
 +    * Accountant
 +  * Consider a business pension plan
 +  * Develop a checklist for ongoing Legal Compliance
 +
 +
 +
 +==Partnership Agreement==
 +  - Name, Business and Location
 +  - Term 
 +  - Capital - Contribution and ownership.
 +  - Profit and Loss - How it is shared.
 +  - Salaries and Drawings - No salary, but can draw on partner credit.
 +  - Interest. No interest.
 +  - Management Duties, Restrictions and Decisionmaking.
 +  - Banking. ​
 +  - Books. Accounting, access and fiscal year.
 +  - Voluntary Termination. Distributions on termination to pay outstanding liabilities and obligations,​ then distribute to partners.
 +  - Death. ​
 +  - Disputes and Choice of Law - Any controversy or claim arising out of or relating to this Agreement, or the breach
 +
 +
 +===Corporation===
 +|  Articles of Incorporation ​ |  Bylaws ​ |  EIN SS-4  |  Licenses |
 +
 +==Articles of Incorporation and Bylaws==
 +** Articles of Incorporation**
 +  * Gives the organization a separate legal existence
 +  * Filed with Secretary of State
 +  * Generally a fill in form, but care must be taken in drafting purpose clauses
 +  * Agreement with the state to establish and maintain the corporation:​ name, duration, location, registered agent, purpose, stock, amendment & dissolution
 +  * Regular filing responsibilities,​ often overseen by secretary or treasurer
 +
 +
 +[[https://​www.sos.mo.gov/​CMSImages/​Business/​Step-by-StepGuides/​For-ProfitDomesticCorpFilingGuide.pdf|Online Filing Guide]]
 +
 +
 +----
 +**Bylaws**
 +  * Law for the Corporation
 +  * Board Governance
 +    * Purpose
 +    * Board qualifications,​ terms and succession
 +    * Board powers and responsibilities,​ meaningful oversight of staff – purposes, activities, financials
 +    * Meetings, notice, decisionmaking
 +    * Reporting requirements
 +    * Financial structure
 +    * Officers qualifications,​ terms and succession
 +    * Committees
 +    * Amendment and dissolution
 +
 +----
 +==Subchapter S Corporation==
 +  * It is taxed as a partnership.
 +  * Eligibility requirements are as follows:
 +    * No more than 75 stockholders are allowed.
 +    * All stockholders must be individuals or qualifying estates and trusts.
 +    * Only one class of stock can be outstanding.
 +    * The corporation must be a domestic one.
 +    * No nonresident alien stockholders are permitted.
 +    * The S corporation cannot own more than 79 percent of the stock of another corporation.
 +  * Benefits
 +   * Tax Savings. No double tax
 +   * Business Expense Tax Credits. Some business expense writeoffs.
 +   * Independent Life. Keeps Business separate from life.
 +
 +
 +
 +==Checklist==
 +  * Name
 +    * Decide on a Name
 +    * Research for others using that name
 +    * Consider fictitious name or DBA
 +    * Consider Trademark Registration
 +  * Set Up Corporation
 +    * File Articles of Incorporation
 +    * Adopt Bylaws for the Corporation
 +    * Determine who will be Directors and Officers
 +    * Set up and issue Stock
 +    * Establish Corporate Minutes books
 +    * Set up shareholder agreements (if more than one active owner)
 +    * Set up buy/sell stock redemption agreement
 +    * Arrange for any asset / liability transfers to corporation
 +    * Apply for Subchapter S, if applicable
 +  * Establish
 +    * Federal Tax ID#
 +    * State Tax ID#
 +    * State Sales Tax ID#
 +    * State Unemployment,​ Withholding Tax ID#
 +  * Apply for required operating permits, licenses, bonds, etc.
 +  * Set up a Finances ​
 +    * Establish appropriate accounting methods (tax year, cash vs. accrual, etc.)
 +    * Set up acceptable bookkeeping system
 +    * Establish expence procedures
 +    * Set up bank / checking accounts
 +  * Purchase Insurance
 +  * Employees
 +    * Personnel procedures / manual
 +    * Establish Payroll procedures
 +  * Establish relationship with professionals
 +    * Bank
 +    * Attorney
 +    * Accountant
 +  * Consider a business pension plan
 +  * Develop a checklist for ongoing Legal Compliance
 +
 +
 +
 +----
 +
 +**Develop a Corporate Record-keeping System**
 +  * Records System
 +    * Board, Management and Staff Records
 +    * Finanical records
 +    * Management
 +    * Compliance (tax, grants, etc)
 +  * Record Creation and Use
 +    * Access and confidentiality
 +    * Storage
 +    * Security
 +  * Record Retention and Destruction
 +    * Legal implications
 +    * When and How
 +
 +
 +
 +
 +----
 +**State and Local Requirements**
 +  * Income Tax (state)
 +  * Sales Tax (state and local)
 +  * Property Tax (local)
 +  * Franchise Tax, etc. (state and local)
 +  * Licenses
 +
 +
 +
 +
 +== Missouri ==
 +  * Articles of Incorporation (SOS)
 +  * Apply for sales tax ID from the state (DOR)
 +  * Annual Report (SOS) (AG)
 +
 +
 +----
 +**Local Regulatory Issues**
 +  * Business licenses and permits
 +    * Licensing and insurance of professionals
 +    * Business license
 +    * Check Secretary of State website
 +  * Zoning laws and municipal regulations
 +    * Check city, county, municipal offices for necessary permits, regulations,​ zoning issues.
 +
 +
 +
 +----
 +**Employment and Payroll**
 +  * Federal Employment Laws
 +  * State Employment Laws
 +  * Industry Employment Requirements
 +  * Payroll
 +    * Exempt vs Nonexempt Employees and Overtime
 +    * Withholding Accounting and Payment
 +  * Employment Handbook
 +
 +
 +
 +
 +----
 +**Intellectual Property**
 +  * **Offensive and Defensive**
 +  * **Trademark** exclusively identifies the source or origin of products or services
 +  * **Copyright** is a set of exclusive rights regulating the use of a particular expression of an idea or information
 +  * **Patent** is a set of exclusive rights granted by a state for a fixed period of time which is new and useful
 +
 +
 +
 +
 +----
 +**Checklist for Corporate Legal Compliance**
 +  * Board Meetings and Minutes
 +  * Annual Filings
 +    * Federal Tax 
 +    * State Corporate filings ​
 +    * State Tax
 +    * Permits, licenses
 +    * Municipal filings and tax
 +  * Financial and Audit Requirements
 +  * Employment
 +  * Contracts and Insurance
 +
 +
 +
 +
 +----
 +**Policies and Procedures**
 +  * Staff Policies and Procedures
 +  * Staff Record Management Policies and Procedures
 +  * Staff Budget and Financial Policies and Procedures
 +  * Employment Policies
 +  * Staff Training Policies
 +  * Client Services Policies and Procedures
 +  * Character of Policies and Procedures
 +    * Clear, useable and available to staff
 +    * Managerial and organizational
 +    * Drafted to anticipate and prevent legal problems.
 +
 +
 +
 +----
 +**Establish Financial Systems**
 +  * Develop an accounting system and budget.
 +    * Gone are the days of shoe box accounting.
 +  * Professional help in this area is important.
 +  * Board Financial Management must ensure appropriate
 +    * Oversight, recordkeeping and reporting.
 +
 +
 +
 +----
 +**Find a Site and Plan to Begin Operations**
 +  * All the hard work begins to pay off in services offered to clients.
 +  * Ensure Policy / Procedures Compliance
 +  * Ensure Recordkeeping
 +  * Regularly review operations
 +    * Update policies and procedures as required
 +
 +
 +
 +
 +
 +----
 +**Legal Duties**
 +  * __Duty of Care__: Take reasonable care when making decisions for the organization,​ be competent
 +  * __Duty of Loyalty__: Act in the best interest of the organization,​ confidentiality
 +    * Recusal: Stand aside when there is a conflict of interest
 +  * __Duty of Obedience__:​ Act in accordance with the organization’s mission, public trust
 +
 +
 +
 +
 +----
 +== Board Governance ==
 +**Boards and Management**
 +
 +{{ ::​board_mgt.png?​400 |}}
 +
 +
 +{{ ::​npogovernance.png?​400 |}}
 +
 +
 +----
 +===LLC===
 +Limited Liability Company
 +  * Limited liability for owners
 +  * Taxed as a partnership ​
 +  * Easier to establish, manage and control than corporations
 +  * Now in all 50 states
 +  * Limited transfer of ownership
 +  * May be cumbersome to share or transfer ownership (unanimous written consent)
 +
 +
 +
 +==Checklist==
 +  * Name
 +    * Decide on a Name
 +    * Research for others using that name
 +    * Consider fictitious name or DBA
 +    * Consider Trademark Registration
 +  * Set Up LLC
 +    * File Articles of Organization with the State
 +    * Adopt operating agreement
 +    * Agree on ownership, capital contribution,​ profit-sharing
 +  * Establish
 +    * Federal Tax ID#
 +    * State Tax ID#
 +    * State Sales Tax ID#
 +    * State Unemployment,​ Withholding Tax ID#
 +  * Apply for required operating permits, licenses, bonds, etc.
 +  * Set up a Finances ​
 +    * Establish appropriate accounting methods (tax year, cash vs. accrual, etc.)
 +    * Set up acceptable bookkeeping system
 +    * Establish expence procedures
 +    * Set up bank / checking accounts
 +  * Purchase Insurance
 +  * Employees
 +    * Personnel procedures / manual
 +    * Establish Payroll procedures
 +  * Establish relationship with professionals
 +    * Bank
 +    * Attorney
 +    * Accountant
 +  * Consider a business pension plan
 +  * Develop a checklist for ongoing Legal Compliance
 +
 +
 +==Operating Agreement==
 +  - Introductory matters: formation, regulation of internal affairs, limitation of authority of a member, power to contract debts, use of legal company name, registered office/​agent,​ record-keeping
 +  - Start-up matters: maintenance of record book, establishment of bank accounts, reimbursement for organizational expenses, and LLC certificate
 +  - Members: initial members, capital contributions and withdrawals,​ membership interests, admission of additional members, certificates of membership interest, and limitations of member liability and responsibility
 +  - Management and control of the business including elections, annual/​special meetings, officers, managers, and powers
 +  - Capital accounts
 +  - Allocations of net profits, net losses, and distributions
 +  - Accounting, records, and reporting
 +  - Transfer and assignment of interest
 +  - Dissolution,​ winding up, and disassociation events
 +  - Indemnification
 +
 +
 +====Six Agreements====
 +
 +**1. Operating Agreement / Bylaws** ​
 +  - identification of the owners; ​
 +  - board of directors; ​
 +  - voting rights; ​
 +  - allocation of profits and losses; ​
 +  - meeting times and places, ​
 +  - owners'​ rights and obligations; ​
 +  - addition of new owners; ​
 +  - the right to sell or transfer stock or membership interests, and 
 +  - amendment and dissolution
 +
 +----
 +**2. Buy / Sell Agreement**
 +  - value of the company; ​
 +  - family members able and willing to succeed; ​
 +  - compensation of non-involved partners/​family; ​
 +  - income for spouse/​dependent children; ​
 +  - transfer of ownership outside partners/​family; ​
 +  - tax planning; ​
 +  - funding; and 
 +  - when, why, how quickly
 +
 +----
 +**3. Contracts with vendors and customers**
 +  - goods/​services, ​
 +  - price, ​
 +  - timeline, ​
 +  - payment terms, ​
 +  - breach and remedies.
 +
 +
 +
 +----
 +**4. Promissory notes, guarantees, security, releases**
 +
 +**5. Corporate Minutes**
 +  - attendees,
 +  - reports, ​
 +  - elections of officers, ​
 +  - resolutions
 +
 +**6. Non-compete,​ Non-disclosure,​ Confidentiality**
 +  - subject matter, ​
 +  - geographic scope, ​
 +  - timeframe, ​
 +  - breach and remedies
 +
 +
 +====Dissolution & Winding Down====
 +  - Close the Business As Required your Organizing Documents
 +  - File with the State
 +  - Notify the IRS and State and Local Tax Agencies
 +  - Plan the Closing of Operations
 +    - Cancel Business Licenses ​
 +    - Terminate Contracts
 +    - Notify Customers / Clients
 +    - Liquidate Stock, Supplies and Equipment
 +    - Plan staffing / severance
 +  - Notification to Creditors
 +  - Settle Creditor Claims
 +  - Collect Money Owed to the Business
 +  - Inform Other Stakeholders About the Closure
 +  - Sell and Distribute Your Assets
 +  - Meet with a Business Attorney Before You Dissolve Your Business
 +
  
business.txt · Last modified: 2018/04/18 15:26 (external edit)