Planning ahead in business generally creates success.  Finding the time to plan and think about your business much less be creative in your thinking and planning can be difficult. But this type of planning is normally profitable in the long run.  I recently had the opportunity to speak to a group of business owners about planning for success and protecting themselves and their business.  Here are a few of the topics we discussed.

• Read all contracts carefully:  this advice is not new but is valuable.  Knowing what the contract provides under certain circumstances generally will increase your profit as you make business decisions.  I spoke with a client this morning and we discussed a contract with a vendor.  Her comment was that “she was surprised to learn that this vendor charged so much” for a particular service.  She then admitted that had she fully read the contract, she would have realized that the vendor had the contractual right to charge a percentage of the overall contract value for the particular service.  Again, read the contract in full including any other documents which the contract references.  Surprises should be for birthdays, not contracts!
• Adding business partners should be done with caution:  many times we have clients who want to bring on others in their business as business owners or partners.  When there is plenty of money, the business is humming, everyone is happy and getting along, this may seem like a good idea.  Step back and make sure this is what you want to do.  Ask yourself if the revenue drops in half, would you still want to add another owner.  Ask yourself, would you want to invite this person to your home with your family for dinner?  Can you discuss factual business challenges with this person without emotions getting in the way?  These are not the only questions to ask but it might help you think about whether to add this person as a partner.
• Can it be that good forever?  We often hear from clients after something bad has happened and the client says something like “I knew it was too good to be true…”  Well, follow your intuition.  When you see a business situation that is perfect, that is a great time to ask yourself how long will this last?  How is the revenue generated?  Is it too good to be true?  Where are the possibilities for loss or liability?  The more questions you ask, the more you learn which will hopefully generate more questions.  That is where we all learn and build our wisdom

Hopefully these bullet points are helpful to you as you plan for your business success.  If you have questions about your business planning please feel free to contact us.

As a successful business owner, you have likely spent the majority of your working life building a business. You have an emotional and financial attachment to the business. Succession planning is essential, whether you value making sure the business is in good hands when you retire or making sure you gain financial security when you exit the business.

Some of the key factors to consider when planning for your eventual departure from the business include:

1. Tax implications: How will your preferred method of transferring the business upon your departure affect your tax burden? A collaborative effort between your attorney and CPA can minimize the tax impact.
2. Time: When do you want to exit? This is important on at least two levels- 1) How much time do you have to plan and 2) Can the transfer occur gradually over multiple years or must it occur all at once?
3. Financial implications: How much cash/income do you need the transfer to generate for you and when do you need it?
4. Structure: Do you plan on transferring the business as a whole, or does it make more sense to sell the assets and let the business identity fade away?

Perhaps you would like to see your business passed on to your children one day, or maybe you are ready to get out now and need to sell your business. Maybe you plan to retire in five to ten years and are ready to plan for your exit. Regardless of where you are in your career or in the life cycle of your business, we can help you prepare for your inevitable exit.

A recent change to the Fair Credit Reporting Act has helped clarify the definition of “creditors” who must comply with the Federal Trade Commission’s (FTC) “Red Flags” Rules to fight identity theft.

The aptly-titled “Red Flag Program Clarification Act of 2010” (codified at 15 U.S.C. § 1681m(e)) was passed in late 2010 to more narrowly define the types of businesses required to implement a Red Flags Rule Program to prevent the identify theft of their customers’ private data.

Prior to the law’s passage, many businesses were unsure if the “Red Flags” requirements applied to them and their transactions.  The general thought was that any business who was a creditor under the Equal Credit Opportunity Act was required to comply with the “Red Flags” rules.

However, the Clarification Act of 2010 narrowed the applicability of the “Red Flags” to only those creditors under the Equal Credit Opportunity Act who regularly and the ordinary course of business:

1) obtains or uses consumer reports, directly or indirectly, in connection with a credit transaction; 2) furnishes information to consumer reporting agencies . . . in connection with a credit transaction; or 3) advances funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person.

Any trade creditor who does not fall into this categorization, such as businesses who deal only with corporate entities, is not compelled to comply with “Red Flags” requirements.

If a business regularly obtains individual credit reports to make credit decisions, such as reports on principals of a small business or partnership, then the business must continue to follow the “Red Flags” rules.

Contributed by Richard A. Prosser and M. Lee Taft