With just a few weeks until the end of 2015, employers are rapidly approaching the statutory California minimum wage increase set to take place on January 1, 2016. This increase means that employers must review their monthly and annual expenses to determine how the salary increase will affect their overall budget, and how it may impact the wages of workers that are already earning more than the minimum wage. Continue reading
PERSONAL LOANS, BANK LOANS, AND SBA LOANS
by Jennifer A. Grady, Esq. and Tristan Younghaus, Esq.
Starting a business can be an exciting, yet costly endeavor. Entrepreneurs need startup capital to cover the cost of living expenses, salaries, overhead, legal fees, filing fees, marketing/advertising, shipping costs, and even production costs. There are numerous funding options available, from interest free loans to venture capital. In this two part series, we will explore the various options that are available for small business owners and entrepreneurs. In this blog, we will discuss loans/gifts from family and friends, bank loans, and Small Business Administration loans. The next posting will explore government grants, venture capital, and crowdfunding.
1. Loans/Gifts From Family and Friends
One of the most common places entrepreneurs begin when searching for funding is by soliciting loans from family and friends. These personal loans are not considered to be a “loan” by the Internal Revenue Service unless the terms of the agreement are stated in writing, (i.e. by stating the loan amount and the interest rate to be paid). Otherwise, after January 1, 2013, the IRS considers the money given to be a gift, and subject to the Federal Gift Tax, if the loan amount is over $14,000.
For borrowers, it may be most advantageous to have the terms of the loan written loosely, and to set proper expectations for all parties involved. For example, in order to preserve the integrity of the personal relationship, the borrower should make it clear that the loan should actually be considered a “gift” in the lender’s mind, and that the lender maintain the expectation that it may never be paid back. This is due to the high likelihood that the money will not be recouped. The borrower may want to avoid memorializing a specific date of repayment, with terms such as, “borrower to pay back loan when monthly income is greater than $10,000.00,” or whenever a reasonable amount is reached. Continue reading
Jennifer Grady, Founding Attorney and Business Consultant at The Grady Firm, P.C. joins Enterprise Radio working in conjunction with the EPN Legal Corner & eLosAngeles. Jennifer discusses common mistakes made by entrepreneurs when involving business partners.
- Tell me about why you founded The Grady Firm and how you help entrepreneurs?
- With the current “Do It Yourself” mentality promoted on the Internet today, why is it important for entrepreneurs and business owners to work with an attorney?
- What are some of the most crucial documents that business owners need at each stage of the business cycle?
- What are some of the most common mistakes that you see entrepreneurs make when working with business partners?
- What are some resources that are available to entrepreneurs who seek legal counsel and moral support as they move forward with the endeavors?
Listen to the Podcast here.
by Jennifer A. Grady, Esq.
Failing to create a formal transition plan in the event of the death, disability, retirement, or divorce of the business owner, or the transfer or sale of the business, is a drastic mistake that is frequently made by the owners of closely-held corporations. This lack of planning can be fatal to a business that does not have a formula for valuing tangible property, such as vehicles, real estate, and equipment; and intangible property, such as licenses, trade names, patents, trademarks, client lists, and goodwill.
A buy-out agreement, also known as a buy-sell agreement, is a legally binding contract between co-owners of a business that governs the situation if and when a co-owner dies or leaves the business. Every co-owned business needs this agreement the moment the business is formed, or as soon as possible after the formation. A buy-out agreement not only protects the remaining business owners when a co-owner intends to leave the company, but also provides protection for the owner who leaves the business. A buyout agreement acts as a sort of “premarital agreement” to protect each owner’s interests by setting the price and terms for a buyout. It is sometimes referred to as a “business will.” Continue reading
In the age of the “Do-It-Yourself” (DIY) mentality, entrepreneurs who are resourceful and eager to cut costs may attempt to perform legal work themselves by using the Internet as a resource for sample agreements, forms, and answers to their legal questions. While the Internet is an amazing tool and the great equalizer, it is no substitute for advice from trained legal counsel. Just as identifying your medical symptoms on sites like WebMD is no substitute for visiting a doctor, using the Internet alone as the source of legal advice can cause more cost and headaches in the long run. The following examples illustrate some of the downsides to using the Internet instead of a lawyer. Continue reading
August 5, 2013-
As a business attorney representing small business owners and entrepreneurs, I am frequently called upon to send demand letters, and even file lawsuits, in order to collect money on behalf of my clients from their delinquent customers. In each of these situations, my clients had one thing in common: none of them signed a Retainer Agreement before starting work on their projects. Instead, they mistakenly believed that the proposal they drafted, or the e-mails they sent back and forth, constituted a “meeting of the minds” as to the project details.
More than likely, both parties will have a different understanding of how much the project will cost, when it is due, how many changes can be made, and what is considered an acceptable work product.
A carefully crafted Retainer Agreement is a contract that sets forth each party’s rights and responsibilities as they pertain to the project. While enforcement of a contract may require a court judgment—and collection of that award is by no means guaranteed—a Retainer Agreement records the parties’ intentions and may save the parties tens of thousands of dollars in attorney’s fees and costs to litigate the parties’ understanding of particular details. Continue reading