business succession

Business Succession – Where to Start

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You’ve spent a lifetime building your business and now it’s time for retirement. So, where do you begin?  When developing your business succession plan, it’s important to consider all of your options because each will have a significant impact on your estate plan, taxes, family, and financial well-being.  Here are a few helpful tips to get started.

Valuation

Regardless of whether you sell to your family, third-party, or employee, you will need a comprehensive valuation of your business.  Many business owners commonly overvalue their business because they place an emotional value on the blood, sweat, and tears they’ve spent working instead of what the company is actually worth in the marketplace.  To avoid this common misstep, it’s imperative to get a third-party analysis to better understand what your company is actually worth, and who is willing to pay for it.

When evaluating, a third-party attorney or financial planner will consider several approaches to your company’s worth:

  • Market Approach – Revenue Growth, Profitability, Company size, and Liquidity
  • Income Approach –Revenue Growth, Profitability, Cost of Capital, Leverage; Working Capital Efficiency; Low Capital Expenditures
  • Asset Approach –Asset Intensive, Leverage, Scarcity, Time

After using all or one of these valuation strategies, you then must consider the most tax efficient method of selling while also providing a secured payment structure.

Let’s consider the following options:

Lump Sum

Selling your business for millions of dollars is every business owners dream.  However, this may not be a viable option for a number of reasons.  First, if selling to employees or family, the buyer will likely not have enough capital or credit to purchase your business’ asking price.  In addition, selling your business outright will result in a large capital gain and tax consequence compared to taking payments over time.  Most notability, it could actually place you in a different tax bracket entirely.   Thus, when considering selling for a lump sum, you should weigh the tax consequences of a lump sum with the potential stream of income over time.

Lump Sum + Installments

If a lump sum will create an unfavorable tax consequence, then you can structure the deal to take a smaller lump sum up-front, and then payments over time.  Most commonly sellers will take a lump sum that is just under the threshold of a tax bracket.  Installments can be made over a number of years that is consistent with your retirement plan.  Here you can increase the number of buyers by avoiding a high-cost lump sum for buyers.  In doing so, this may entice inside employees and/or family members who have worked hard within the company but cannot afford your asking price.  And because there is a partial payment up-front, buyers are motivated by their initial investment.

Installments Only

If selling to family and/or employees, installment payments are an affordable way to sell your business and avoid a lump sum tax burden.  However, business owners are often still involved using this method because employees don’t have as much “skin in the game.” This method often requires the owner’s expertise in maintaining operations.  In other words, you won’t get paid unless the business is able to sustain itself with its successors.  This strategy is recommended for smaller companies where the owners are able to work part-time and still have some degree of authority. It’s recommended that certain provisions be implemented that would cease payments in the event of a “dead beat” buyer/employee.

Self – Cancelling Installment Note

You can give your employees a business in exchange for a promissory note by using a “self–cancelling installment note.”   The promissory note is usually coupled with a personal guarantee signed by the employee.  Payments are then made over time but cease when the business owner passes away.  This option reduces capital gains and estate taxes.  However, the payments made will be set at a premium set by the IRS mortality tables to account for the business owners’ lifetime.  If the business lives past this time, the payments cease.  If the owner dies before this timeline, the payments cease.

For more information or to request a free consultation with a business and/or estate planning attorney, call Baron Law LLC at 216-573-3723 or dan@baronlawcleveland.com.

 

CARES Act – What Every Business Owner Should Know

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The Covid-19 Economic Relief Package was approved on Monday, March 30th. This unprecedented $2 trillion dollar stimulus package may be incredibly beneficial for our clients, especially business owners.  Here are some of the more significant points you should know:

  • Single-households that earn $75,000 or less a year (as per their latest tax return) will be supplied with a one-time payment of $1,200.
  • Couples who earn $150,000 annually will receive a one-time payment of $2,400 with an additional $500 per child within that household.
  • These benefits are capped around the $99,000 income level and tapper between $75,000 and $100,000.

Small business protection and aid is a major component of the stimulus package. The key points include:

  • Businesses and nonprofits with 500 or fewer employees are generally eligible for assistance. Further, self-employed workers and gig workers also qualify. Qualified borrowers must have been in business before February 15, and must have paid employee salaries and payroll taxes or contractors.
  • The program is meant to ensure that businesses have the funds to pay their employees and to prevent layoffs. Loans offered through the program are forgivable, if used for their intended purpose: As long as a business receiving a loan maintains the average size of its workforce, it will only need to pay back the interest accrued, and the principal will effectively become a grant.
  • Businesses can receive loans up to $10 million at up to 4% interest rates, depending on how much they paid their employees between January 1 and February 29.
  • Loans are provided through banks, credit unions, and other lenders, and are guaranteed by the Small Business Administration. Loan applications should be submitted through lenders who are partnered with the Small Business Administration.

Link to the 2020 Stimulus bill: https://www.documentcloud.org/documents/6819206-CARES-ACT-FINAL-TEXT.html

Business Attorney Baron Law

The Difference Between Business As Usual And Bankruptcy. Here Are Two Ohio Laws That All Business Owners Must Know!

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Every business and every business owner should be aware if and how the Consumer Sales Protection Act (“CSPA”) and/or the Home Solicitation Sales Act (“HSSA”) effects their business. On the first day of law school, every new law student learns that ignorance of the law is no defense. The same applies to business owners. In the context of CSPA or HSSA violations, being unaware of the law, which in turn leads to noncompliance of the law, can open you up to thousands of dollars in damages, discretionary rescission of expensive contracts, and ruin your hard-earned professional reputation. The CSPA and HSSA are lengthy statutes which cover a multitude of business and scenarios and, as such, require an experienced hand to walk you through all the wrinkles and hurdles. If your personal knowledge of these statutes is lacking, never hesitate to contact an experienced Cleveland business attorney. A little forethought now, can save you a whole lot later.    

  • What is the CSPA and HSSA? 

The Ohio CSPA is located under Chapter 1345 of the Ohio Revised code. In a nutshell, the CSPA prohibits “suppliers” from committing unfair or deceptive acts or practices in connection with a “consumer transaction.” Naturally who is and is not a “supplier” and what is or is not a “consumer transaction” under the CSPA are pivotal first points of analysis. Further, the CSPA does not stand alone. The CSPA works in conjunction with Ohio’s HSSA. Again, to simplify everything, the CSPA is a list of things considered unfair or deceptive acts or practices and denotes potential avenues for redress of legal grievances for harmed customers. On top of the CSPA, the HSSA also provides an additional list of things considered unfair or deceptive acts or practices and denotes potential avenues for redress of legal grievances for harmed customers but with slightly different triggering circumstances, i.e. the existence of a home solicitation sale, hence the name, and different recovery options for customers.  

  • Why should business owners care about the CSPA and HSSA? 

Many businesses and industries are subject to the laws and requirements of the CSPA and HSSA without even knowing it. Thus, these businesses are running around selling services and completing jobs all the while exposing themselves to massive amounts of potential liability. Remember, ignorance of the law is no defense and all it takes is one persnickety consumer to ruin your whole fiscal year and eat all your profits through litigation.   

In the context of home improvement, residential contractors, HVAC, roofers, electricians, landscapers, concrete work, repairs companies, and other home sale situations, to name only few, if a company has committed an unfair and deceptive trade practice, a consumer often has 1) the right to cancel the agreement, 2) receive a full refund, and 3) depending on the circumstances may not even have to return any materials or pay for any labor already performed.  

The CSPA includes a non-exclusive list of specific acts and practices that are conclusively “unfair and deceptive” and therefore violate Ohio law. The CSPA, via the HSSA, also includes specific “home solicitation sale” remedies, one of which includes a statutory right to a three-day right to cancel period when the contract is signed at the consumer’s residence. Every seller must notify the buyer of his or her right to cancel the sale and provide the buyer with a “Notice of Cancellation” form that the buyer can use to cancel the sale, both the notice and the form to cancel have specific statutory requirements. If the supplier fails to include notice and proper language regarding this 3-day right in the contract or use the proper forms, consumers are entitled to cancel their agreement whenever they wish because the 3-day timer never started. Courts have said in these situations that the right to cancel never expired, even many years after the job was done. Only following the law by delivering proper documents does a supplier start the clock. In turn, this allows homeowners to bring a claim for a refund or to get out of paying money owed on a contract well after the two-year statute of limitations under the CSPA has run out. 

  • Recent changes in the CSPA and HSSA. 

As previously stated, the CSPA and HSSA together represent a list of unfair and deceptive trade practices which often triggers liability for the offending company. Ohio Senate Bill 227, which became effective on April 6, 2017, added a new practice to this list that is conclusively violative, as in if you do it, legally there is no discussion over whether it was “unfair and deceptive” under the CSPA, it just is. This new violation is: 

“[T]he failure of a supplier to obtain or maintain any registration, license, bond, or insurance required by state law or local ordinance for the supplier to engage in the supplier’s trade or profession is an unfair or deceptive act or practice.” 

In short, under current Ohio law, even the most careful and observant supplier can violate the CSPA/HSSA by failing to timely renew any registration, license, bond, or insurance that the supplier is required to maintain under state or local law. As such, ignorance can no longer be the standard operating procedure for services such as HVAC, electrical, plumbing or refrigeration work, and other suppliers of home services. Further, for businesses who use outside contractors or other temporary workers, the risk is even more severe. Now you must be sure not only are you and your employees bonded and licensed, but any contractors have the proper paper work as well, even though technically, they are not your employees. Often courts find the burden is on the business to make due diligence and ensure compliance, responsibility must fall somewhere, and it sure isn’t going to fall on the consumer. 

Furthermore, albeit a more minor change, Senate Bill 227 also updates the Notice of Cancellation requirements under the HSSA to include fax or e-mail options, which the supplier must provide. In turn, the customer/buyer can now cancel the sale by delivering the Notice of Cancellation “in person or manually” or by “facsimile transmission or electronic mail” to the seller. As such, even a minor oversight such as not including fax or e-mail cancellations options on standard forms can open up a world of litigation pain on an unknowing business. 

A law without consequences is a paper tiger. You may ask yourself, who cares if technically my business engages in unfair or deceptive acts or practices. Well, for CSPA and HSSA violations, often customers are entitled to triple damages and attorney’s fees, good for them, bad for business owners. No stretch of the imagination to see a couple of CSPA/HSSA lawsuits can kill a profitable business real quick. Notice, under Ohio law it doesn’t matter if failure of compliance was willful or inadvertent, the only thing that matters is did you break the law. This is why it is important to maintain a good and ongoing relationship with a local Cleveland business attorney. Often the legal requirements for local business are buried deep within local ordinances and administrative code. Remember, what you don’t know can hurt you and, just like everything else with a business, it is on owners to stay current, but most especially, compliant with any recent changes in Ohio law.  

 

Baron Law LLC Cleveland Ohio

I’m Thinking Of Incorporating My Business, What Is An S Corporation?

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Are you thinking of incorporating your business? Have you considered becoming an “S Corporation” instead. Cleveland Business Attorney Baron Law LLC offers you the following information to consider before making the choice. What are the advantages of becoming an “S Corp”?

Nowadays many businesses are taking advantage of incorporation to protect themselves and their owners. A common question is which type of business structure is best. Should I create an LLC, C-Corp, or S-Corp? Sole-Proprietorship? Partnership?

As with many legal and economic questions, the answer isn’t black and white. The reason there are so many options when forming your business is because every business venture is different and possesses different opportunities and issues. That is why a good business attorney is invaluable. Ultimately, knowing which type of business entity to create is best found out through experience, and a good Ohio business attorney will have the necessary experience to help you make the best decision. For this discussion, though, S-Corporations are the focus. “S-Corps” have been steadily rising in popularity in recent years and many small business owners are wondering if and how using this type of incorporation is right for them.

What is an S corporation?

An S corporation is a pro-profit corporate structure that elected to be taxed under Subsection S of the Internal Revenue Code. Such election subjects the corporation to “pass-through” taxation while still retaining many of the benefits of “regular” incorporation.

The first primary distinguishing characteristic of an S-Corp is the pass-through taxation. That is corporate income, losses, deduction, and credits pass through the corporation to its shareholders for federal tax purposes. Thus, the shareholders report the profits and losses of the S-Corp, which is proportionally assigned to each shareholder’s ownership interest, on their individual tax returns and are taxed at individual income tax rates. This effectively avoids the double taxation that regular C-Corporations are subject to.

The second distinguishing characteristic of an S-Corp is the relative difficulty in formation. That is, compared to making an LLC or a C-Corp, the IRS/Secretary of State is much more stringent with the formal requirements of an S-Corp. Consequently, the initial satisfaction of these requirements and the continuing obligations inherent in remaining S-Corp eligible means more paperwork and corporate legwork is needed compared to other corporate forms. Ensuring these requirements are met, every year, is a major reason why Ohio business attorneys are retained. Finding out during tax season that your business was in violation of the IRS code and was subject to a completely different tax structure may leave a company insolvent or unknowingly operating at a loss for the fiscal year. Not exactly a fun conversation to have with shareholders.

What are the requirements of an S corporation?

Per the Internal Revenue Service, to qualify for S corporation status you must first file for “regular” corporate status then elect to become an S-Corp by submitting IRS Form 2553, Election by a Small Business Corporation. In order to file IRS Form 2553, a corporation must observe the following formalities:

The business must be a domestic corporation or a domestic entity eligible to elect to be treated as one.

The business cannot have more than 100 shareholders. (Note, spouses and members of the same family, respectively, are treated as one shareholder.)

The business must only be comprised of allowable shareholders. Only permittable individuals, trusts, and estates under the IRS code. Partnerships, non-resident alien shareholders, and other corporations are not allowed.

The business must only have one class of stock. Generally, a corporation is treated as having only one class of stock if all outstanding shares of the corporation’s stock confer identical rights to distribution and liquidation proceeds.

Each shareholder consents to the S-Corp election and manifests such consent in writing.

The business is not an ineligible corporation for S-Corp election, that is certain financial institutions, insurance companies, possessions corporations, or domestic international sales corporations.

Furthermore, S-Corps must also observe more stringent internal corporate formalities. This proves to the IRS that the S-Corp election, and its accompanying advantages, are being used for legitimate business purposes and not to the detriment of the public or for ill-gain. The logic is if shareholders are willing to follow the rules in regard to corporate management, then probably the business isn’t stealing or hurting people. Some of the required formalities for S-Corporations include: adopting corporate bylaws, issuing stock to shareholders, holding an initial director and shareholder meeting, holding the same meeting at least once a year, and recording and storing meeting minutes within corporate records. An experienced business attorney can draft a comprehensive business plan to follow and assist in its implementation.

What are the benefits of an S corporation?

Asset Protection

All corporations, like LLCs, C-Corps, and S-Corps, provide their owners/shareholders with limited liability protection. Limited liability means that the owners or shareholders personal assets are protected from claims of the creditors of the business. This includes claims that also arise from contract disputes and litigation, either the cost of defending or prosecuting litigation or via adverse judgments against the business. Without this shield, which comes from filing and choosing to operate a business via a corporate form, debts of the business attach to the individuals running the business. In light of this big personal risk, most people would choose not to operate a business. This is why a Cleveland business attorney is so important, these attorneys ensure that the required corporate formalities are followed so the limited liability shield is recognized by the courts and creditors and can protect you.

Pass-Through Taxation

As previously mentioned, S-Corps are classified as pass-through business entities. As such, they avoid double taxation that C-Corps are subject to. Double taxation occurs when dividend income is taxed at both the corporate level, when the business receives the profits, and at the shareholder level, when the shareholder receives their proportionate share of the business dividends. Instead of the IRS getting two bites, with S-Corps they only get one. Further, additional corporate benefits such as business income, tax deductions, losses, and certain credits also can pass through the S-Corp to the shareholders.

Deciding to incorporate and choosing which type of corporate structure to operate as are big decisions. The particular type of corporate form you go with fundamentally affects how you will run and manage your business. A business attorney is in the best position to advise and assist in making the best decision. Regardless of how you incorporate, any comprehensive corporate formation will include, at minimum, an operating agreement, certificates of membership, articles of incorporation, EIN number, subscription agreement, recommendations, and appropriate filing fee. For existing and soon-to-be corporations alike, make sure you have all these documents, failure to do so could cost you thousands of dollars down the line.

You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.

About the author: Mike E. Benjamin, Esq.

Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.

Baron Law Cleveland Ohio

DBA What Does It Stand For And Does My Business Need One?

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Cleveland, Ohio, business law firm, Baron Law LLC, Cleveland, Ohio, answers questions on what a DBA (aka “Doing Business As”) is and should you set your business up in this manner. For more comprehensive information contact Baron Law Cleveland to schedule an appointment to discuss the different ways you could set up your business and what would be most beneficial to you. 

I recently sat down with an immigrant from Africa who said one of the amazing things about America is that anyone can run a business doing anything. We likely take it for granted that the industrious and entrepreneurial here can chase their dreams while in other places such freedom to pursue economic endeavors is lacking. This freedom to create and operate your own business, however, is not the wild west. With freedom comes the opportunity for malicious or incompetent business practices, just ask anyone unfortunate enough to employ a shady auto mechanic, landscaper, or financial planner. That’s why to protect the public, lay down some semblance of order, and make ways to address misconduct and grievances, Ohio law has rules on how businesses can be run. These rules are partially why starting up a business is such a complex process with a lot of moving pieces and paperwork. Thus, retaining an experienced Ohio business attorney will ensure the proper foundation is set so your business can succeed and grow.

DBAs, i.e. doing business as, sometimes referred to as Fictitious Business Names or Assumed Business Names, are a product of consumer protection laws. Naturally, with the ability of anyone to make a business and also operate under a business name, often people don’t know who they are actually working with or who they hired. The potential for confusion and pseudo-anonymity with small businesses leads to risks for consumers. Namely, the inability to pursue legal remedies for misconduct simply because they don’t know the identity of who to complain about or who is ultimately liable. This is why Ohio law incentivizes the use of DBAs and business registration for small business and punishes those who don’t

Trade name v. Fictious Name

In the legal world minor details often have big outcomes regarding procedure, responsibility, and liability. Whether you’re operating under a trade name or fictitious name can make a big difference. Under Ohio law a trade name means a name used in business or trade to designate the business of the use and to which the use asserts a right to exclusive use. You file with the Ohio Secretary of State to reserve your trade name so no other business can use it or claim it as their own.

Fictitious names, on the other hand, means a name used in business or trade that is fictitious and that the user has not registered or is not entitled to register as a trade name. These are not required to be distinguishable from the records of any other previously registered name and provide no protection or ownership of the name. Facially, the differences between trade and fictitious names appear simple, but the consequences for not having either can be dire for business owners. Talk with a local Cleveland area business attorney to find out the how and why about the different methods of business registration.

Operating without a trade or fictitious name

In Ohio no person doing business under a trade name or fictitious name shall commence or maintain an action in the trade name or fictitious name in any court in this state or on account of any contracts made or transactions had in the trade name or fictitious name until it has first complied with Ohio law. See O.R.C. § 1329.10 (B). What this means for those operating without filing a DBA or a trade name is that these business owners are prevented from suing or counter-suing in the name of their business until the filing requirements are satisfied.

In the real world this means those operating without registered names can’t sue on delinquent debts, can’t sue over contracts entered into on behalf of the business, and can’t raise counterclaims in defense if the business is ever a defendant in a legal proceeding. This is the carrot and stick of Ohio law. If you prefer to operate without a registered business name, leading to potential customer confusion and greater chance for misconduct, than you aren’t allowed to fully exercise the legal rights of your business. Granted, though registration compliance allows retroactive enforcement of business rights, the time wasted recognizing, fixing, then filing upon newly reinstated rights can be crippling within a litigation context. Time wasted properly filing a DBA or trade name can mean the passing of a statute of limitations, missing a discovery cut-off, and/or the relinquishment of affirmative defenses. This is why finding and working with an Ohio business attorney when you’re starting a business or facing significant business growth is so important. I hear it time and time again from small business owners, “I wish someone would have told me that.”

How to file a trade, fictitious name, or DBA

The filings are relatively straightforward. You can use the forms provided on the Ohio Secretary of State’s website and file a trade name registration or report the use of a fictitious name. DBA’s, however, are not filings recognized by the Ohio Secretary of State. The use of trade names or reporting of fictitious names are similar to how DBA’s operate and largely accomplish the same purpose.

The devil is always in the details. Small business owners know the struggles of being pulled in a thousand directions at once and operating with a full schedule every work day. The last thing you need on your plate is dealing with complex legal issues that could have been, and should have been, addressed when your business was being created. A few filings and minor filing fees afford your business a lot more legal protection than most people realize. Hopefully, your business runs without a hitch and you never have to lean on these protections. For those business owners not so lucky, however, the legal protections which come from filing properly and being compliant with Ohio law can mean the difference between business longevity and filing for bankruptcy.

About the author: Mike E. Benjamin, Esq.

Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.


Baron Law Cleveland Business Attorney

How Do Businesses Collect a Debt?

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Cleveland, Ohio, business law firm, Baron Law LLC, Cleveland, Ohio, answers questions on the laws which need to be followed when attempting to collect a debt.  For more comprehensive information contact Baron Law Cleveland to schedule an appointment if you have found yourself in a situation where you are unable to collect a debt.

Unfortunately, people don’t pay their bills on time, sometimes not at all. This is just a reality of business. Tenants fail to pay rent, purchasers don’t pay in full, and business associates don’t uphold their end of the bargain. Naturally, the human reaction is to immediately go after wrongful parties and get what you’re owed. In reality, however, debt collection is not a simple and straight forward process. That is why third-party collectors are often used. However, over the many decades and centuries of business, whether a legitimate debt was owed or not, these collectors went too far in attempting to right a wrong.  In response, nowadays there are rules and regulations governing debt collection practices to prevent misconduct. As such, cavalier or aggressive debt collection practices can, ironically, make a legitimate debtor liable for more than the debt they are trying to collect on. This is why contacting the services of a local Cleveland area business attorney is so critical. A single lawsuit over debt collection misconduct can ruin a quarter, but longtime or routine debt collection misconduct can lead to bankruptcy via litigation.   

  1. What laws apply when I’m trying to collect a debt? 

The three main laws that every third-party debt collector should be aware of when collecting debts is 1) the Fair Debt Collection Practices Act, 2) the Ohio Fair Debt Collection Practices Act, and 3) the Consumers Sales Practices Act.   

  • FDCPA – this federal law limits the behavior and methods of third-party debt collectors who are trying to collect a debt for another, whether a real person or otherwise. Within are rules regarding timing, method, and form of contact, causes of action for misconduct, and duties of specialized debt collection personnel.  

 

  • OFDCPA – This Act primarily concerns the legal conventions and guidelines that must be observed when a debt is assigned for collection by another, i.e. a third-party creditor. The Ohio FDCPA adds additional safeguards to the Federal FDCPA in order to ensure assignees of debts are legitimate businesses with legitimate credit claims.   

 

  • CSPA – this law primarily provides causes of action for deceptive trade practices, of which debt collection is regularly a context. Various Ohio courts have said that various violations of the FDCPA constitute a violation of the CSPA in that the purpose of both acts is to prohibit both unfair and deceptive acts and any violation of the FDCPA is necessarily an unfair and deceptive act or practice in violation of the CSPA. 

 

What are the things I can’t do when collecting a debt? 

Simply, a third-party debt collector cannot engage in deceptive trade practices. What is a deceptive trade practice is a much litigated issue. However, the particulars of what conduct constitutes a deceptive trade practice are too numerous to go over here, but a local Ohio business attorney will be more than happy to fill you in on the details and makes sure you’re not violating State and/or Federal law.  

The short answer though, in the context of debt collection, is that a deceptive trade practice is an activity by an individual or business that is meant to mislead or lure a debtor into paying a debt that isn’t owed, paying more than is owed, attempting to collect in an aggressive, harassing, offensive manner or failing to follow proper form when communicating with a debtor. Within the FDCPA, OFDCPA, and CSPA, there are sections which explicitly state that a violation or one or more provisions of the law is conclusively a deceptive trade practice thus justifying damages.  

How much lability could I be facing for improper debt collection?  

Just under the FDCPA alone, any debt collector who fails to comply with any provision of this law with respect to any person is liable to such person in an amount equal to the sum of 

(1) any actual damage sustained by such person as a result of such failure; 

 (2) additional damages up to $1,000; and/or 

 (3) reasonable attorney’s fees if the court finds them justified. 

 

How do I make sure I’m not breaking the law when trying to collect?  

State and federal law must be followed to the letter when attempting in collect on a third-party debt. An Ohio business attorney can create a compliant debt collection program, complete with compliant forms and communications, to ensure any legitimate debt isn’t consumed by legal damages.  

There are, however, some standard methods to remain compliant under state and federal law. 

  • Mini Miranda Notice – the law requires that any debt collector inform a debtor in the initial communication that “this communication is from a debtor collector. This is an attempt to collect a debt and any information obtained will be used for that purpose.” This is commonly called the mini-Miranda and puts the debtor on notice of who they are speaking with and why. If the first communication with the debtor is oral, this notice must be given orally and included in the first written communication. Regardless of who initiates communication, this notice must be given.

 

  • Debt Validation Notice – every third-party collector must within 5 days of the initial communication send the debtor written notice containing the following:  

1) the amount of the debt,  

2) name of creditor that’s owed the debt,  

3) statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector, 

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector, and 

 (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.  

 The purpose of this notice is to inform debtor of important rights, timing deadlines, and authenticity of the debt being pursued.  

 It is never fun for either the debtor, creditor, or collector to pursue an outstanding debt. Feelings get hurt, lives are disrupted, and valuable business resources and time is wasted. Therefore, it is wise to ensure that state and federal laws are not being broken on top of all that. Throwing potential litigation in with the contentious profession of debt collection begs for trouble.  As such, wise debt collectors retain the counsel and guidance of experienced business attorneys to enable them to focus on recovering debts, not worrying about compliance with government rules and regulations.  

 You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.  

Helping You And Your Loved Ones Plan For The Future

About the author: Mike E. Benjamin, Esq.  

Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.   

 

Cleveland, Ohio Attorney

What is Business Succession?

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Whether you’re planning for retirement or the life of your business after your death, it’s imperative to develop a business succession plan to sooner rather than later.   There is no “one plan fits all” when it comes to developing a succession plan for your business.  And given that the economy is constantly changing, it isn’t surprising small business owners focus their energies on business survival, future growth, and even remaining active in business after retirement.

Business succession is about three things (1) Estate planning; (2) Retirement; and (3) Risk Management.

Estate Planning

Your estate plan should be incorporated into your business succession plan.  What will happen to your company assets after you die?  Who will run your business?  If you want to provide for your family using your business assets, you should consider at the very least having a last will and testament.  Carefully drafting your will allows you to select desired beneficiaries, elect an executor, and transfer your assets through probate.  Your family will be going through a difficult time.  Setting up a last will and testament in advance helps your family during that difficult time.

Retirement

When thinking about retirement, it’s important to consider your options when selling your business.  Will you sell with a lump sum, installments, mix, employee buy-out, or merger?  There are numerous options when planning for your retirement and taking advantage of the business you built.  Thus, business succession is about planning for your exit strategy.  To learn more about your options, visit this article.

Risk Management

Business succession is about limiting your risk.  If you have partners within your company, you should be aware of the risks involved.  For example, if your partner gets divorced, their spouse is entitled to the partner’s share in the business through the divorce proceedings.  If your partner dies, you can now be partners with their spouse or estate.  One option to avoid this potential risk is to create a buy-sell agreement through a cross purchase agreement or entity purchase agreement.

Business succession is an important idea that every business owner should consider.  Contact your Cleveland, Ohio business succession and estate planning attorney for more information on how to set up your plan.  You may also consider contacting Cleveland, Ohio law firm Baron Law LLC at 216-573-3723.

 

Business succession attorney cleveland

Business Succession Options

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Cleveland, Ohio business succession attorney Dan Baron offers the following on estate planning and business succession:

You’ve spent a lifetime building your business and now its time for retirement.  Where do you start?  When developing your business succession plan, it’s important to consider all of your options.   Selling and/or transferring your business will have significant implications on your estate plan, taxes, family, and financial well-being.  Here are a few suggested options with a discussion on these implications.

Valuation

Regardless of whether you sell to your family, third-party, or friend, you will need a complete evaluation of your business.  Many business owners overvalue their business because they’re place an emotional value on the blood, sweat, and tears they’ve spent growing their business over the years.  It’s imperative to get a third-party evaluation on your business to better understand what your company is worth, and who is willing to buy.

When evaluating, your business attorney and/or financial advisor will consider several approaches to your company’s worth:

  • Market Approach – Revenue growth, profitability, company size, liquidity
  • Income Approach –Revenue growth, profitability, cost of capital, leverage; Working capital efficiency; Low capital expenditures
  • Asset Approach –Asset intensive, leverage, scarcity, time

Now that you have a value, how should you sell your business in an effective way to provide a secure retirement while considering tax consequences? Let’s consider the following options.

Lump Sum

Selling your business for millions of dollars is every business owners dream.  However, this may not be a viable option for several reasons.  First, if selling to employees or family, these buyers may not have enough capital or credit to purchase your business’ worth.  Next, selling your business outright will result in a large capital gain and tax consequence compared to taking payments over timer.  It could also place you in a different tax bracket entirely.   Thus, when considering selling for a lump sum, you should consult with your estate planning and business attorney to consider all the tax consequences and other planning tools available

Lump Sum + Installments

If a lump sum will create an unfavorable tax consequence, then you can structure the deal so that you take a smaller lump sum up-front and payments over time.  Your business attorney will suggest taking a lump sum that is just under the threshold of a tax bracket.

Installments Only

If selling to family or employees, installment payments are an affordable way to sell your business. However, many times the business owner will still be involved when selling to employees and moreover, the business needs to be sustainable in order to receive the payments over time.  In other words, you can’t get paid if they business fails over time.

Self – Cancelling Installment Note

Here the business owner gives his employees the business in exchange for a promissory note – usually purchased by employees.  The promissory note is usually coupled with a personal guarantee from the employees.  Payments are then made over time but cease when the business owner passes away.  This option reduces capital gains and estate taxes.  However, the payments made will be set at a premium set by the IRS mortality tables to account for the business owners lifetime.  If the business owner lives past this time, the payments cease.  If the owner dies before this timeline, the payments cease.

There are several other options business owners have when selling their business.  For more information, or to request a free consultation with a Cleveland, Ohio business and estate planning attorney, contact Baron Law LLC today at 216-573-3723.

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Salary Negotiations

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The Cavaliers have finally cashed in, the curse is broken, and Cleveland is rejoicing! Many Cleveland businesses are experiencing record profits, and with the Republican National Convention around the corner, the boom is expected to continue.

You’ve been working long hours, picking up the slack, and you’d like to cash in on your efforts. How do you go about asking for a raise?

1. Timing is everything.
• Don’t wait for your next annual performance review (unless it’s just around the corner).
• Do capitalize on the success of a project or period of additional responsibility.
• Don’t ask if the company is making cutbacks or laying people off.

2. Do your homework.
• Research your market value based on position, performance, and education.
• Gather data on the overall job market by talking to a headhunter or an online jobs site.
• Collect information on your performance—sales increases, customer testimonials, growth, etc.

3. Plan your conversation.
• Practice your pitch with a friend who can be tough and push back.
• Talk to your boss about upcoming challenges for the company (preferably prior to the salary negotiation) so you can discuss solutions to these challenges and how you can deliver.
• Schedule a meeting with your boss, letting him or her know that you want to talk about your career growth.

4. Stay calm.
• Don’t allow emotions into the conversation
• Use silence as a tool. Lay out your case and then pause to give your boss time to process.
• Don’t ramble on if there isn’t an immediate response.
• Be clear and specific, but not aggressive.
• Don’t give your boss a sob story of not being able to survive on what you’re making.

5. End positively
• Whatever the boss’ response, be positive. Express thanks for his or her time.
• Ask questions about what you can do in the future to be considered for a raise in the future.
• If possible, rephrase the question. If you realize that your request is not being received favorably, change the word raise to “salary adjustment” which implies market value instead of extra money.

This blog is intended for educational purposes only. It gives general information and not specific legal advice. This advice is not specific to Ohio or Cleveland. For specific legal advice, contact Baron Law at 216.573.3723 or dan@baronlawcleveland.com to speak with an attorney.

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Changes in Ohio Power of Attorney Laws

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Changes in Ohio Power of Attorney Laws

If you’re an Ohio resident concerned with the estate plan or medical care of a loved one, you should be familiar with Ohio’s laws regarding power of attorney.  Cleveland, Ohio estate planning attorney Dan A. Baron offers the following:

What is a financial power of attorney?

A financial power of attorney (POA) is a legal document an individual (the “principal”) can use to appoint someone (the “agent”) to act on his or her behalf.  This authority can be used for financial, business, and health matters.   Most often, this authority is used when an individual becomes unable to handle his or her own affairs.  However, a POA can be used for other matters such as taking care of business matters.  A principal can name one agent, or two or more co-agents, each of whom can act alone, unless the POA states otherwise.  The POA might allow for each agent to act independently, or as a group.

Changes in Ohio law

Effective March 22, 2012, Ohio adopted new laws regarding power of attorneys.   Ohio’s Uniform Power of Attorney Act, or UPOAA, focuses on preventing financial elder abuse.  The law now includes a statutory form with language designed to help prevent agents from abusing their power.  Put simply, the law now demands POA’s to be more specific.  For example, third parties such as a financial institution are not required to honor a general POA.  Now, the law asks that a POA includes specifically which types of assets and accounts the agent is allowed to control.

Ohio provides a statutory form that includes language designed to help prevent agents from abusing their power.  This form can be found in Ohio Revised Code 1337.60.   The form lists actions that an agent may or may not take and includes a section called “Important Information for Agent.”   The principal can simply check the box of the powers he or she wishes to designate.   It’s important to consult with an attorney when implementing one of these forms into your estate plan.

A power of attorney created before March 22, 2012 will still be valid; however, as an attorney to review it in light of the current law and consider using the 2012 statutory POA form.   In sum, UPOAA prohibits agents from performing certain acts unless the POA specifically authorizes them.  Because financial POA documents give significant powers to another person, they should be granted only after careful consideration.

To learn more about drafting a power of attorney, contact the law office of Baron Law LLC.  You will speak directly with Cleveland, Ohio attorney, Dan Baron.  Call today at 216-573-3723 to learn more about how Baron Law can help create your estate plan and power of attorney.