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5 Common Mistakes Made Prior to Starting Your Business

80% of new businesses fail within one and one-half years after their start-up. Failure to properly plan and evaluate the needs of your business will lead to failure. It is important to lay a solid foundation that will support your business enterprise. The following are 5 common mistakes people make prior to starting a business.

  1. ) No Business Plan. In my practice as a business attorney in Louisville, KY, I have seen no better mechanism to help ensure your business’ success than a well-thought-out and vetted business plan. The process of developing a business plan forces one to address multiple levels of planning some of which include market analysis and planning, financial projections and cash flow analysis, organization of management team, sales strategies, just to name a few items. A business plan provides the forethought that helps you springboard to success.
  2. ) Insufficient Capital. Lack of start-up capital is a major contributor to business failure that I have encountered as a lawyer. Cash is king. It takes time to position your business to throw-off enough cash flow to cover expenses. Many entrepreneurs under estimate the capital needed to get their business over the hump. Often, companies do not have adequate financing (e.g. lines of credit) to sustain it during its initial stages.
  3. ) No Business Structure. A typical mistake of a small start-up business is not availing itself of a business structure that may shelter the business owner from personal liability. Corporations and Limited Liability Companies may afford such protection.
  4. ) Failure to Have a Formal Ownership Agreement. Entities with more than one owner should prepare a shareholder, operating or partnership agreement (whichever is applicable) between themselves to be used as a road map for many company and ownership issues. These agreements address various items and triggering events such as capitalization, distributions, voluntary and involuntary transfers of ownership interest, death, disability, and ownership buy-out. If there is no contract between owners, your business may dissolve or litigation may ensue without a written understanding of how to handle certain events. Such an agreement will help hurdle the roadblocks that may be encountered.
  5. ) Failure to Assemble a Team of Outside Advisors. You do not know as much as you think. You may believe that you can handle matters on your own. However, what you do not know may hurt you. It is important to develop and utilize an advisory team that includes attorneys, accountants, bankers, insurance agents and others to help you navigate financial success and protect your company from liability.

Richard A. Greenberg

Richard A. Greenberg, PLLC
2321 Lime Kiln Lane
Louisville, KY 40222

(502) 429-8496

[email protected]
www.richardgreenberglaw.com

Copyright 2018 – Richard A Greenberg, Louisville, KY – All Rights Reserved

How To Find The Best Business Lawyer

7 COMMON ESTATE PLANNING MISTAKES

One should be aware of certain pitfalls when considering the establishment or the revision of their estate plan. Failure to properly address various aspects of estate planning may result in unintended consequences. The following are 7 common errors that people make.

(1) FAILURE TO HAVE AN ESTATE PLAN: Your assets may be distributed to those other than who you want, or in a manner against your wishes, unless your directions are set forth in pertinent documents. Your assets could be distributed according to the State’s intestate statute (passing away without a will) without the proper planning and instrumentation. For instance, you may desire that your spouse receives all your assets upon your death. Intestate statutes may direct that your assets be split with half to your surviving spouse and the remaining half divided equally among your children.

(2) FAILURE TO PLAN IN THE EVENT OF DISABILITY: There may be a time when you are not able to make cognizant decisions. This may stem from various medical concerns such as dementia, psychological problems, and injury causing loss of cognitive abilities. Without the execution of a financial Power of Attorney and a Health Care Directive, a court of law may appoint someone, other than who you want, to handle your financial and medical affairs. This may lead to not so desired results.

(3) FAILURE TO GET CONSENT FROM APPOINTEES: You may appoint various individuals or entities as your executor to your Will, guardian for your children, attorney-in-fact to your Power of Attorney, health care surrogate to your Health Care Directive, or trustee to your Trust. However, if you did not inform them of such and do not procure their consent at that time, they may later refuse to accept such responsibility. In such instance, someone other than your appointee may be directing your finances, making your medical decisions, and controlling your children.

(4) FAILURE TO ESTABLISH A TRUST: Many people set-up a trust mainly, in the event of their death, to provide for their children until they reach a certain age. Many people believe that their children may be too young, are a spendthrift, or should be productive on their own prior to receipt of significant distribution. Without a trust, your children may receive all their inheritance immediately upon your death. (Do you want your 18 year old to have unlimited access to your assets if you are deceased?)

(5) FAILURE TO CHANGE BENEFICIARIES: Beneficiary designations are required on various instruments such as insurance policies and IRA’s. One’s initial beneficiary designations may not effectuate your implemented estate plan. For instance, original beneficiary designations may be first to your spouse, and if your spouse does not survive you, then to your children. You may have subsequently established a trust to assist your children throughout their life. Your plan may be to leave the trust unfunded until you pass away. At that time, your plan is to direct funds from your life insurance policy and IRA distributions to the trust. However, in many instances, people forget to change their beneficiary designations (whether primary or contingent) on the applicable instruments to funnel the proceeds to the trust. This would render the trust useless due to the lack of assets to proceed as directed.

(6) UNINTENDED DISINHERITANCE: You and your spouse may have what I call reciprocal “I love you wills” where both of you leave everything to the other, and if your spouse is predeceased, then to your children. If your spouse predeceases you, you remarry, and you both execute I love you wills, and you subsequently die, your probateable assets will be distributed to your spouse (who may change their will after you decease and disinherit your children) without your children receiving anything.

(7) FAILURE TO UPDATE YOUR ESTATE PLAN: There are triggering events that may impact your present estate plan. These may include death, birth, changes in business, significant increase/decrease in wealth, and divorce. Each of these may necessitate modification of your estate plan.

It is incumbent that you that you avoid these and other common mistakes. You should continue to be aware of your present situation and apply it to your estate planning needs.

Richard A. Greenberg
Richard A. Greenberg, PLLC
2321 Lime Kiln Lane
Louisville, KY 40222
(502) 429-8496 (Direct Dial)
[email protected]
www.richardgreenberglaw.com

EFFECTS OF ENVIRONMENTAL REGULATION

Businesses are faced with the ever-increasing environmental regulation. Business practices and uses of items that appear to have no attendant legal application may subject a business to civil and criminal liability unless proper precautions are taken and compliance is obtained. The federal Environmental Protection Agency, the Commonwealth of Kentucky Energy and Environment Cabinet Department of Environmental Protection, and local governmental and quasi-governmental agencies have significant hammers to require one or one’s business to remediate contaminated property or restructure certain processes.

The federal Environmental Protection Agency, the Commonwealth of Kentucky Energy and Environment Cabinet Department of Environmental Protection, and local governmental and quasi-governmental agencies have significant hammers to require one or one’s business to remediate contaminated property or restructure certain processes.

[Read more…]

ESTATE PLANNING- DO I HAVE THE RIGHT STUFF?

Have you asked yourself any of the following questions?

  • DO I HAVE AN ESTATE PLAN?
  • DOES MY WILL, TRUST, POWER OF ATTORNEY, LIVING WILL DIRECTIVE AND HEALTHCARE SURROGATE DESIGNATION REFLECT MY CURRENT GOALS AND VALUES?
  • DO MY ESTATE PLANNING DOCUMENTS COMPLY WITH THE LAW, AND DO THEY PUT ME IN A BETTER TAX POSITION?
  • WHAT HAPPENS IF I BECOME INCOMPETENT AND UNABLE TO MAKE DECISIONS?
  • WHAT HAPPENS IF I AM ON LIFE SUPPORT AND HAVE NO CHANCE OF RECOVERY?
  • WHO IS GOING TO TAKE CARE OF MY CHILDREN IF I PASS AWAY?
  • WHO RECEIVES MY REAL OR PERSONAL PROPERTY WHEN I DIE?
  • HOW ARE MY DEBTS ADDRESSED WHEN I AM GONE?

[Read more…]

GROWING YOUR BUSINESS IN LOUISVILLE? TAKE ADVANTAGE OF THESE TWO LOUISVILLE METRO RESOURCES

ADVICE AND RESOURCE INVOLVEMENT:

I have written about the EnterpriseCorp in a previous blog but it is worth discussing this gem again. As the “entrepreneurial arm” of Greater Louisville Inc. (the City of Louisville Chamber of Commerce), this organization provides advice and assists local businesses and entrepreneurs in growing their businesses through analysis, strategic development, capital growth assistance and resource involvement. EnterpriseCorp.’s focus on providing resources to the local Louisville Metro business community is where the organization really shines. It offers business plan templates, models for investor presentations, identifies and provides assistance with funding sources, presents CEO roundtables and much more. It is well worth it to take advantage of the resources that EnterpriseCorp. provides local Louisville businesses and entrepreneurs.

[Read more…]

Kentucky Business Community Wary of the EPA’s Proposed Greenhouse Gas Regulations

In June 2014, the United States Environmental Protection Agency (“EPA”) proposed several new greenhouse gas regulations intended to reduce carbon dioxide emissions produced by electricity generating sectors. The EPA’s stated goal is to reduce overall carbon emissions in the nation by 30 percent by requiring each state to meet a specific emission reduction goal. Under the proposed regulations, Kentucky would be required to reduce carbon dioxide emissions 18 to 20 percent by 2020.  If enacted, the regulations would have the greatest impact on the production of coal and coal related industries. Currently, Kentucky is the third largest producer of coal in the United States and the coal industry is a huge economic generator in the Commonwealth. The Kentucky Energy and Environment Cabinet estimates that in 2013 severance taxes on coal production were $212,443,519.59, and overall, the coal industry directly contributes billions of dollars to the economy of Kentucky. Thus, the proposed regulations have the potential to have a significant effect on Kentucky business and the economy.

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New Tax Incentives for Angel Investors

On July 23, 2014, Kentucky Governor Steve Beshear signed into law House Bill 445, which expands the Kentucky Investment Fund Act and provides tax credits to “angel investors” with the aim of encouraging individuals to invest in small local startups and businesses.

Effective January 1, 2015, angel investors who invest a minimum of $10,000 dollars in local businesses with “high growth potential” in fields like information technology, bioscience and advanced manufacturing, can receive a tax credit equal to 50 percent of their investment if the startup is located in a county that the state has determined is economically depressed. Investors can receive up to a 40 percent tax credit of an investment in businesses located anywhere else within the Commonwealth. The maximum annual credit that can be awarded to an angel investor is $200,000 dollars. The law also provides some tax incentives to angel investors outside of Kentucky. Investors who reside outside of Kentucky can transfer tax credit to state residents and under the new law. If the Kentucky resident purchases the credit, the out of state investor can then recoup some of their investment. [Read more…]

Will the new Water Resources and Reform Development Act Encourage Private Investment?

On June 10, 2014, President Obama signed into law the new Water Resources and Reform Development Act of 2014 (“WRRDA”). The Act’s primary purpose is to improve America’s water infrastructure through the funding of construction programs and projects. Introduced in 2012 by Senators Barbara Boxer (D) and David Vitter (R), the bill garnered unusual bi-partisan support. The WRRDA is also noteworthy because of something the Act is missing. No earmarks. As noted by Speaker John Boehner (R), “this is quite a departure for a bill whose claim to fame -or infamy, as it were – was being saturated with earmarks.  Hundreds of them.” Of significant importance, the WRRDA provides an avenue for the use and acceleration of private investment. [Read more…]

Kentucky’s New Uniform Trust Code

On July 15, 2014, Kentucky officially adopted the Uniform Trust Code (“UTC”), joining twenty-eight states that have officially adopted the UTC including Virginia, West Virginia, Tennessee and Ohio. Kentucky’s adaptation of the UTC will be codified under KRS Chapter 386B and as with any uniform law; the intent of the UTC is to provide clarity and stability to areas of the law typically governed by common law doctrine.  The Kentucky UTC brings with it some substantive changes to the law of trusts and estates, most notably: [Read more…]

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