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The Business of Business

I read a newspaper article recently that discussed several local restaurant closings with the comment that the town was hard on new restaurants. While that may be so, I would suggest another explanation; doing business is hard on businesses, especially new ones.

While you may be able to cook a mean hamburger, or you may be the best electrician in town, having your own business these days is extremely difficult. While small business may account for most of the jobs in our economy and most of the new job creation, successful operation of a business in today’s climate is not for the faint of heart.

While I am privileged in my practice to help many people go into business, I also represent too many people that are going out of business. The majority of the time the problem was simply an inabity to avoid the pitfalls of operating a business.

Be it a restaurant, a car dealership, a fence company or a law practice, there are taxes to file, debts to collect, employees to support and and excessive amounts of governmental requirements. Add to that the need for marketing, cash management, and time management, finding time for your area of expertise in making that pizza or building that cabinet is nearly impossible.

Good luck and God bless all of you small business owners, you will certainly need it.

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Being Your Own Lawyer

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Posted In: General Info

I had mentioned in an earlier post about the problems people can encounter in preparing their own legal documents. While forms are easily obtained, and do-it-yourself legal software is plentiful, it is what you don’t know that will get you. Just recently, I have dealt with several of these misguided attempts.

There was the deed to the church, except that the church legally does not exist, it is just a name they use. So, who is authorized to sign for the “church”? Or, the instance where they put the church in the pastor’s name – and he died. His wife and children now own the church.

I saw a Will recently that did not actually name any heirs. A contract to sell real estate was used as if it actually transferred title when it only set out what was to be done before title was transferred; so, the property wasn’t actually sold. And the examples go on and on.

Utilize forms at your own risk – which would be the warning that an attorney would have given you, if you had consulted one!

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Thanks for the Help?

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Posted In: General Info, Texas Business

President Obama’s recent nod to assisting small business only serves to further demonstrate his lack of understanding of how small businesses work. His recent proposals to make more loans available and cut the capital gains taxes for certain investments completely miss the attitude of small business owners in this market.

It is too slow and the outlook to unstable to risk expansion. The only potential benefit from the President’s proposal is the reduction in unemployment taxes, except that states such as Texas have just raised the state part of that tax considerably.

Until the constant drumbeat of ever increasing taxes in amount and number stops coming from Washington, small business owners are going to stay bunkered down, not hiring, not expanding, not investing and not building inventories. The government can continue to predict a better financial climate for the Spring of 2010, but small business owners are not sold on it.

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Recession – Waiting for the Other Shoe to Drop

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Posted In: General Info, Texas Business

Advising small business owners on legal matters, I get a unique perspective on the economy from their position. And, since 60 percent of all new jobs are generated by small businesses, that perspective is quite relevant to the question of when this recession might end, assuming you don’t believe it already has.

What I am seeing is many businesses that know they will not survive, but as their business is their sole livelihood, they are staying open as long as possible. You can stay in business a surprisingly long time by simply putting off paying creditors or making minimal payments while the debt increases when you know that you ultimately will be closing the doors and walking away.

We even have a name for it: Pre-Bankruptcy Planning. These businesses are not hiring employees, not investing in their businesses and not spending any money not absolutely necessary.

The ultimate failure of these businesses could significantly prolong this recession.

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Appraisal District Battles

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Posted In: General Info

Each Spring, our 254 counties in Texas go about the unpopular task of determining how much each parcel of real estate, as well as business related personal property, is going to be valued for the purposes of determining how much tax its owners will have to pay.

Typically done by Appraisal Districts, quasi-governmental entities, they assess the values that each taxing unit will use on each piece of property that the particular entity may tax. Thus, the District will tell the city, county, school, etc. what value to use on your house and then the city, county, school, etc. will tax you on that value. The District does not set taxes, just value.

To argue with the Distict, you argue value, not taxes. And, that argument is usually just two-fold. First, what is your property and the property supposedly like yours worth? Second, is your particular property different from those supposedly just like yours that makes yours worth less? So, your commercial building, or your house, is going to be valued using the same formula as used on the surrounding peoperties, such as by square footage, age, type of building material. etc. In that way, the property values are equalized.

So, for example, you would argue that you and your neighbors are all worth less because the recent sales in your area show values are lower than assessed. Then, is there something about your property, like an easement or a bad foundation, that is unusual and makes your particular property worth less than your neighbors.

This is usually accomplished at a hearing before a three member review committee after you have sent in your appeal notice. The members are people from the community who usually have some real estate knowledge, and they will be open to a reasonable explanation from you. Most people, unfortunately, just complain that their property is assessed to high but have no real basis for their opinion.

Thus, most people are not happy with the opinion they get from the committee. With a little kowledge and planning, you can do better.

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I want to be a corporation!

In my law practice, I give advice to many people who are starting their own businesses and the question that comes up most often is whether they should form a corporation. While it is a good question to always ask, my answer often is “no”, which is too bad as “yes” would make me more money. And, after all, this is how I make my living. There are times, however, when the answer is “yes”.

There are really only three ways to do business. The first is by yourself. We call that a sole proprietorship, just to make it sound complicated. The second, a partnership, is with one or more people. A partnership is like a marriage. They are relatively easy to start, everybody shares everything and getting out is much like a divorce. I am a much bigger advocate of marriage than I am of partnerships.

The third way is to incorporate. A corporation really is nothing more than a new legal person. It exists separate from the person or people that started it. We have all kinds of them – general Corporations, Limited Liability Corporations (although that is really what they all do), Professional Corporations, Non-Profit Corporations, and so on. So, why would you want one? Generally, if you are looking at the possibility of a lot of liability and you cannot insulate yourself with insurance, a corporation might help. If your CPA tells you to incorporate to save some taxes, do it. Finally, a corporation is a good way to avoid that partnership thing.

So, by all means, inquire. But, don’t be too quick to spend the money and obligate yourself to spend more than a little bit of time on a corporation that may not give you any benefit. That new business will keep you busy enough anyway.

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Why pay that bill?

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One of the things I do as a lawyer is help my clients try to collect debts – bills – that are owed to them from individuals or companies that will not pay them. In the course of this work, I sometimes wonder why some people actually pay their debts when it seems so many others don’t.

Not too many years ago, it was a matter of personal pride that you paid your debts. I suspect John Wayne always paid his debts. Even if it meant riding through 500 miles of desert to throw a bag of gold onto another man’s table and walk out without uttering a word. Those days and our moral compass seem for the most part to be long gone.

We now pay very high interest rates on credit cards because of the large number of people that don’t pay their credit card bills. Credit bureaus, collection agencies and “repo-men” all proliferate in our modern society. Bankruptcies are common and many laws are in place to protect people that owe money. Too many people are living beyond their means.

The answer I believe, both morally and legally, is that it does eventually catch up to you. Bad credit means higher interest rates or the inability to purchase some items. Garnishments, Attachments, Turnover Orders, Sequestrations, Civil Executions and Abstracts of Judgment all exist to aid a creditor in eventually collecting the money that a debtor owes. And creditors frequently have long memories. Eventually, I believe, it all does balance out.

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Convenience Stores

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Posted In: Small Business News

The next time you stop in your local C-store for a soda and a lottery ticket, give some thought to the fact that it is in one of the most government regulated businesses in today’s marketplace. Almost all of the many services available there are licensed, inspected and regulated by at least one of our city, state or national bureaucracies. Yet they somehow manage to stay in business.

Before you can swipe that credit card for your gasoline, the Texas Commission on Environmental Quality, the TCEQ, has licensed and inspected the underground storage tanks, the fuel lines and all of the records required to be kept, including how much tax is owed on the fuel sold. You can’t enter the store until the local Health Department has made sure that everything in there meets their requirements and the City has issued the appropriate permits and will be collecting sales tax.

What would you like to buy? That lottery ticket is regulated by the State. Cigarette or beer purchases could send the clerk to jail if you are underage. If you are only buying cigarette papers, be careful, that could be considered drug paraphernalia. TCEQ, The Health Department, TABC, State Lottery and the City all enforce their regulations with monetary fines or license revocation.

So, the next time you are paying for your Big Gulp, wish the clerk a happy day. He or she has a lot to worry about!

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My divorce will be easy!

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Divorce is much too popular these days, and everyone that wants one thinks theirs is easy – and therefore the lawyer shouldn’t charge them very much. Well, I would not want to be charged very much either, but if you don’t plan to pay much, don’t expect much!

First, there are services that will provide you with the forms to enable you to file your own divorce. These companies cannot answer your questions as that would be practicing law. However, if your divorce is actually simple, you and your soon-to-be-ex spouse can figure out the forms, and you don’t mind going to the courthouse alone, it might work for you. Luckily, if you make a mistake, you can always pay an attorney a lot of money to fix it!

Second, if your divorce is REALLY uncontested, the attorney’s fees won’t be all that much. The problem is that “uncontested” doesn’t mean you have almost everything worked out, or that you just can’t talk to each other. In a typical uncontested divorce, the attorney may offer suggestions to resolve problems between the parties, but if you can’t work out ALL of the problems, and you need the attorney to get involved, it is not uncontested and you will be paying more in fees.

Finally, the divorce is easy, everything is agreed, and my spouse has an attorney. Do I need one? Well, you just said it. Your spouse has an attorney, you don’t. No attorney can, and thus no attorney does, represent both of you. That attorney is not looking out for your best interests. Spending a little bit of money to have an attorney look over the Divorce Decree for you BEFORE you sign it might save you a lot of money down the road.

Good luck!

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You Can Be Your Own Lawyer, Sometimes…

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Posted In: General Info, Starting a Business

With the advent of legal forms available from various internet sites, many people have decided that they can be their own lawyer. There is an old adage in legal circles that anyone who represents himself has a fool for a client. True to that statement, I have made a lot of money correcting people’s mistakes in their do-it-yourself legal work. However, there is one place where the non-lawyer is welcomed in Texas, the “people’s court” – Justice of the Peace Courts and their Small Claims Courts.

These courts, present in all 254 counties in the state, are entry level courts of generally low jurisdiction (the maximum you can “sue for” is low) and simple relief (what the Judge can do). However, most of the Rules of Civil Procedure that apply in the County and District Courts do not apply in the Justice Courts. Thus, most deadlines, pleading requirements and all of the little things that trip up non-lawyers, just aren’t there. You do get to just go to court and tell the judge (or the jury if you so choose) why you think you were harmed. The filing fees are generally inexpensive and you can get a trial relatively quickly.

While all Justices of the Peace receive instruction on being a judge, there is no requirement that a Justice of the Peace by a lawyer, and many are not. All are elected officials and are generally responsive to any voter appearing before them. So, if somebody cheated you or didn’t pay you and you can’t afford a lawyer, give your local Justice of the Peace Court a try!

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