Hi, How Can We Help You?

Category Archives: Miscellaneous

Common Mistakes That Startup Businesses Should Avoid

Author By Todd McMurtryPosted on

Some startup companies become successful businesses, but many more fail because they don’t take the steps necessary to put their companies on a workable basis or they take ill-advised actions that cost them dearly. 

Here are some common mistakes that you should avoid if you are starting up a new business: 

  • Failing to make a feasible business plan — If you don’t start out knowing what you hope to achieve and instituting a viable plan for how to achieve it, your business is likely to flounder quickly. In addition to serving as a roadmap to keep the business on track, a good business plan can help boost the confidence of your lenders and investors.
  • Misunderstanding your market — Startups are most successful when they fill a need not adequately served by current businesses. This doesn’t necessarily mean that you can’t offer a product or service to which your customer base doesn’t already have access, as long as it’s of sufficient quality to be competitive. You also need to price your product or service competitively and to encourage feedback from your customers for use in improving your business.
  • Having inadequate capital to succeed — It may take considerable time for your business to become profitable. Until then, you need to line up enough capital to keep it going. Shrewd budgeting can help keep unnecessary costs down, so that you can put your money where it will do the most good.
  • Inadequately protecting your personal assets — Startups are inherently risky, and you don’t want to lose your proverbial shirt because of business debts and possible lawsuits. You should make sure you have adequate insurance and consider organizing your company into a corporation or limited liability company that will protect your personal assets from current and future creditors if financial problems arise.
  • Failing to make suitable contracts — Depending on the type and size of your business, you will likely need to work on a regular basis with some independent contractors, such as suppliers, advertising or marketing firms. You can avoid unnecessary problems with them by making written contracts that are clear, enforceable and adequately protective of your interests, preferably with the assistance of an experienced business contracts attorney.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

When Does the Clock Start Running on a Legal Malpractice Claim?

Author By Todd McMurtryPosted on

Attorneys are only human and it is possible that your lawyer made a serious mistake or gave you poor advice that caused you to suffer a negative outcome in your case. If you are disappointed with the result of a matter you entrusted to an attorney, you may have a legal malpractice cause of action. An important question is how long you have to sue.

In Kentucky, the statute of limitations requires an injured party to sue within one year from the date of the occurrence of professional malpractice or from the date when the malpractice was discovered or reasonably should have been discovered. But this can be a difficult standard to apply, since legal errors are often not readily apparent to lay people.

Fortunately, a few Kentucky Supreme Court opinions have fleshed out the contours of this standard in a way that is intended to protect the rights of clients while avoiding unnecessary legal malpractice litigation.

First, the court has held that legal malpractice doesn’t occur until the lawyer’s negligence hurts the client in a way that is not speculative and can’t be reversed. Generally, this means that you can’t sue until you are out of normal remedies for correcting the error. For instance, in cases where the lawyer allegedly mishandled litigation, the court has said that the malpractice didn’t occur until the client’s right to appeal was exhausted.

Secondly, the court applies the “continuous representation” rule, which delays the start of the limitations period until after the relationship with the attorney ends. One rationale for this rule is that you can’t be expected to discover the legal malpractice as long as the attorney who committed malpractice is the one advising you. Often times, you are not in a position to know whether the attorney is doing a bad job or is merely faced with a bad case or an obstinate judge.

This rule also gives attorneys the opportunity to correct their mistakes. A legal malpractice lawsuit is a poor substitute for pursuing a still winnable case. This doesn’t mean you are required to stick with an attorney who you believe is not doing their job properly. You are entitled to seek better representation if you can. However, the rule is meant to give the client and the attorney the opportunity to solve the problem before the mistake becomes irreversible.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

Tea Party groups move to unseal Lois Lerner and Holly Paz depositions

Author By Christopher P. FinneyPosted on

As we previously wrote about, here, Finney Law Firm was honored to serve as co-counsel to Tea Party groups throughout the nation in what we believe was the only certified class action ever against the Internal Revenue Service for its targeted discrimination against the plaintiffs resulting in protracted delays in processing and granting tax exemption status due to their political viewpoints. The targeting was led by Obama administration IRS official Lois Lerner and her chief deputy at the IRS, Holly Paz.

After years of pitched legal battles, that litigation ended with a dramatic settlement in which the IRS paid damages to Tea Party groups, the IRS paid the Tea Parties’ attorneys fees, and then-US Attorney General Jeff Sessions issued a personal apology on behalf of the United States of America that included this unequivocal statement about the IRS intentional wrongdoing: “this abuse of power will not be tolerated.”

In that litigation, plaintiffs succeeded in obtaining the depositions of Lerner and Paz, but the transcripts of the depositions — finally revealing their own testimony about the origins and implementation of the outrageous policies and practices — have remain sealed under a temporary emergency Order by Judge Michael Barrett. (Even US House and Senate Committees investigating the wrongdoing were stymied in getting that testimony when Lerner and Paz each invoked their 5th Amendment right against self-incrimination.)  That Order bottling up the deposition transcripts was never made final, and thus it could not be appealed.  Thus, to this day — more than three years later — the deposition transcripts remain hidden from public scrutiny.

As a result, this week, Plaintiff’s counsel filed a Motion for Writ of Mandamus before the 6th Circuit Court of Appeals seeking to have the depositions unsealed.  You may read the Motion here.

What is Defamation Per Se and What Damages Are Recoverable?

Author By Todd McMurtryPosted on

If you own a business or engage in any other profession in Kentucky, you depend on your reputation to draw the customers or clients you need. Even in your private life, you want to maintain a good name. But all that can be undermined if someone makes false statements about you. Kentucky and other states recognize that such statements, known as defamation, may entitle you or your business to recover money damages for the resulting loss of reputation. Usually, you need to prove actual injury but in some cases — those involving defamation per se — the injury might be presumed.

Defamation per se is defined as spoken or written language that exposes the plaintiff to public hatred, ridicule, contempt or disgrace. It can also be a statement that causes people to have such a negative opinion of the plaintiff that they refuse to associate with him or her. Examples are statements that accuses a person of incest or adultery or unfairly prejudices the public against the person in their business or profession.

However, a federal court case applying the Kentucky law of defamation per se in a commercial context declared that it is not enough to say that a business’ product is bad. To be defamation per se, a statement must suggest that the business engaged in fraud, deceit, or dishonest or other reprehensible conduct.

There is also a distinction between what counts as libel per se or as slander per se. In a case of libel, which means defamation in writing, the court looks at the ordinary, natural meaning of the express language itself to determine whether it’s defamatory per se. For slander, which means spoken defamation, it is sufficient that the language used merely implies fraud, dishonesty, a crime or other illegal or unethical conduct.

In defamation cases, the damages that a jury may award to individuals or corporations include:

  • Damage to the plaintiff’s reputation
  • Specific economic damages, such as loss of employment or profits
  • Punitive damages, if the defendant’s conduct was oppressive, malicious or fraudulent

The significance of a finding of defamation per se is that it automatically establishes the plaintiff’s entitlement to damages without having to show an exact dollar amount of harm suffered. However, it is still important for plaintiffs to quantify their damages in order to maximize recovery. Otherwise, the jury is left to its own subjective determination of damages, which may be far lower than deserved.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

Another public interest class action win — Cincinnati Alarm Tax

Author By Christopher P. FinneyPosted on

As we wrote here, in November the Ohio First District Court of Appeals in White v. Cincinnati unanimously ruled in favor of clients of the 1851 Center for Constitutional Law and Finney Law Firm in a challenge to the City of Cincinnati’s alarm tax scheme. The City of Cincinnati asked the Ohio Supreme Court to review that decision, a discretionary call by Court.  Historically, Ohio’s top Court accepts only about 5% of such cases for consideration.

Today, the Ohio Supreme Court declined to accept for review the First District decision.  Since that was the last stop on the railroad for the City, the inevitable next legal steps are injunction against further collection of the tax, class certification and an order of restitution before Common Pleas Court Judge Wende Cross.

Amazingly, even after the First District ruled that the tax was illegal, through today the City of Cincinnati insisted on continued collection of the tax. So, an injunction by the trial court now will be necessary.

If you are a Cincinnati alarm fee payor, you should be expecting a refund once the amount has been calculated and the procedural hurdles cleared, perhaps later this year.  If the City continues to attempt to extract alarm charges from you, respectfully decline and send them this blog entry!

New Mediation Rules May Revamp Civil Litigation in Kentucky

Author By Todd McMurtryPosted on

Mediation, a quicker and more cost-effective alternative to litigation, has long been a voluntary option for parties in civil disputes. Now, the Kentucky Supreme Court has adopted rule changes that make court-ordered mediation commonplace in the litigation process. As a result, more lawsuits are likely to be resolved by this method.

The new rules, which took effect on Feb. 1, 2022, give courts the authority to refer all or part of a civil case to mediation and to appoint a mediator — a neutral third party who helps settle some or all of the contested issues. The mediation will remain fully independent of, and outside of, the court proceeding but the court has the discretion to enforce its order to mediate.

In deciding whether to order mediation, the court is required to consider these factors:

  • The stage of the litigation, including whether discovery has been conducted
  • The nature of the issues to be resolved
  • The value to the parties of confidentiality, rapid resolution or maintenance of ongoing relationships
  • The willingness of the parties to mutually resolve their dispute
  • Other attempts at dispute resolution that may have been made
  • The ability of the parties to participate in the mediation process, including virtual mediation
  • The cost to the parties

Mediation will not be ordered in any case where a court determines that one party may pose a risk of harm to others.

Once mediation is ordered, the litigants have 15 days to agree on a mediator and if they don’t, the court can select one. A mediator must be a Kentucky lawyer and comply with a code of conduct that, among other things, requires them to remain competent in mediation skills. Payment of the mediator’s fees is typically shared among the parties. The attorneys for the parties schedule a mediation conference. The mediator confers with the attorneys (and any unrepresented parties) to work out procedures for the conference and may require them to submit confidential statements of the case in advance. The parties’ representatives at the conference must have full authority to negotiate a settlement.

Although mediation is a separate process, the court must be kept advised of its progress. The parties are required to submit a joint statement to the court enumerating the issues that have been resolved and those that remain for trial. The parties may also identify any matters that, if resolved or completed, would facilitate a settlement. The court in its discretion may encourage the parties to continue discussions, with the goal of avoiding or limiting a trial.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

9 tips for real estate buyers, sellers, landlords and tenants to protect themselves in inflationary times

Author By Christopher P. FinneyPosted on

The business buzzword for 2022 is: Inflation.

The inflation rate in 2021 was 7.5%, a rate that the the Federal Reserve says took them completely by surprise.  And 2022?  Many prognosticators (this author included) believe inflation will hit double digits for the first time in more than 30 years.  This comes after rates of inflation consistently at or below 2% for the past decade.  As a result, many marketplace participants simply are not aware of strategies that will enable them to navigate the shoals of an inflationary environment.

This blog entry may pivot between references to rates of inflation and rates of interest for borrowing.  These two concepts, while different, are addressed interchangeably as (a) inflation is a widely accepted indicator of an over-stimulated economy and (b) the predictable response to inflation is raising interest rates charged to banks by the Fed to dampen that economic activity.  In turn, banks will then raise the rates charged to consumer and commercial borrowers.  So, higher inflation inevitably begets higher interest rates.  The Fed has forecasted both (i) the possibility of front-loaded rate increases, meaning sharp rises in the coming months (as opposed to sequential rate hikes being stretched out over months and years) and (ii) as many as seven rate hikes in 2022 alone.  This means interest rates could rise by a full 2% or more from today’s rates before January of 2023.  How high can rates go? In March of 1980 the prime rate of interest peaked at 19.5%.  Imagine the impact of interest rate adjustments on your business model at those exorbitant rates.

Here are a few things to consider to protect yourself in inflationary times:

  1. Utilize commercial rent adjustments to your advantage.  During low inflationary times, landlords and tenants have commonly avoided complex periodic calculations for rent increases based upon Consumer Price Increases (CPI) increases, in favor of either fixed rent rates during the term of a lease or rent increases only pursuant  to a fixed schedule (say, for example 5% increases every 3 years).  As inflation accelerates and persists at high levels, landlords will hope they had full CPI adjustments built into their leases past and will start demanding then in leases in the future.  Conversely, tenants will cherish fixed-rate, longer-term leases that create a benefit to them of inflation (but the rapidly-changing office and retail markets might cause devaluation of spaces that previous saw decades of stability and strength).  As always, we recommend that tenants consider asking for an early termination provision in all commercial leases.
  2. Anticipate and avoid mortgage interest rate surprises. Many residential mortgages and most commercial mortgages have fixed interest rates only for a few years.  As to residential rates, after the period of the fixed rate, frequently rate increases are capped, but will still be painful.  But for commercial borrowers, when the fixed term expires, the rate increase is typically unlimited.  As a result, commercial borrowers locked into mortgages that might not be paid off for a decade or more could have dramatic, uncapped and unanticipated increases in the interest portion of the mortgage payment that continues to escalate each adjustment period.  To mitigate these impacts, consider refinancing into a new fixed-rate term that gives you breathing room before the impact of higher rates hits with full force.  Also, the sale of parts of your portfolio to pay down debt could lift your P&L from the greatest impacts of interest rate hikes.
  3. Be careful of fixed-rate pricing.  Home builders, contractors and manufacturers are experiencing difficulties fulfilling obligations under fixed-price contracts for matters that have a delivery date well into the future, shrinking their profit margins or turning winning contracts into losers.  Our office then is seeing instances of home builders trying to walk away from contracts and contractors seeking to convert fixed-price contracts into cost-plus agreements, shifting material and subcontractor pricing increases to buyers.  If you are that builder or contractor, consider adding an automatic or negotiated inflation adjustment in the contract and as a buyer, you want to lock in that fixed pricing firmly.
  4. Anticipate suppliers walking away from contracts. Similarly, we have seen manufacturers and distributors of certain products avoiding their obligations to supply certain goods or equipment.  As a buyer, do you have your supply contracts documented correctly and have you diversified your supply pipeline to protect yourself if a supplier lets you down?  Is the party with whom you are contracting sufficiently capitalized to stand behind their contractual obligations?
  5. Consider inflation and interest-rate contingencies.  The Cincinnati Area Board of Realtors/Dayton Area Board of Realtors form residential purchase contract allows a buyer to state the specific terms of the mortgage it is seeking as a contingency to ia buyer’s performance under the contract.  If you specify a “fixed rate loan for 80% of the purchase price at a rate below 3.5% per annum fixed for a period of 30 years,” and interest rates rise before the closing, the buyer has a perfect out.  Similarly, buyers and sellers can include in any contract an “out” for high rates of inflation and higher interest rates.
  6. Be wary of options.  Options to renew leases and options to purchase may seem innocuous and predictable in stable times.  But in a dynamic high-interest rate marketplace, an option acquired today to buy a property at a fixed price three, five or ten years into the future (say under a long-term commercial lease) can unexpectedly enrich the option holder.  Options can be a way a way to leverage dramatic profits to the option holder.
  7. Be prepared to offer seller financing.  A close partner to higher interest rates are tighter lending standards.  Fewer and fewer buyers can afford to buy at inflated interest rates, and lenders also frequently tighten their loan eligibility standards.  As a result, a eligible buyers — abundant today — become frighteningly scarce.  In the worst of the inflationary period at the end of 1977 to 1981, sellers had to offer loan assumptions, land contracts, leases with options (or obligations) to purchase (with the warning noted above) and simple notes with accompanying mortgages to get any property sold.
  8. Be prepared to buy at foreclosure sales.  Foreclosure sales, which have virtually disappeared for the past two years, could come roaring back as commercial and residential owners cannot afford their new, higher mortgage payments, and, of course, mortgage foreclosure moratoria have been lifted.
  9. Be prepared to offer seller financing.  A close partner to higher interest rates are frequently tighter lending standards.  Fewer and fewer buyers can afford to buy at inflated interest rates, and lenders also frequently tighten their loan eligibility standards.  As a result, a eligible buyers — abundant today — become frighteningly scarce.  When lending is loose (as today), it seems readily available to anyone.  And when it tightens, it seems to strangle the marketplaces.  In the worst of the inflationary period at the end of 1977 to 1981, sellers had to offer loan assumptions, land contracts, leases with options (or obligations) to purchase and simple notes with accompanying mortgages to get almost any property sold.

We saw with the rapid deterioration of the real estate market from 2006 to 2010 that buyers many times would willfully breach their contractual obligations to buy or rent.  In this process, they would search for a contingency or loophole — any argument whatsoever — to evade their contractual promises.  And in other instances, they would just outright walk away.  Accompanying these contractual breaches were also insolvency and bankruptcy, making collection impractical or impossible.  Similarly, as the real estate marketplace has heated up over the past five years, we have seen sellers work to evade their contractual obligations so they could retain an appreciating investment or simply realize a higher price from a second buyer.

How can you protect yourself in this type of dynamic market to assure performance by a buyer or seller?

  • Consider escrow deposits, guarantees and other security. Sellers can demand higher earnest money deposits, non-refundable deposits and short contingency periods. Buyers can use tools we have written about here and here of Affidavits of Facts Relating to Title and legal actions for specific performance. Further, consider adding personal guarantees to contractual promises from corporate and LLC buyers or sellers.  Additionally, the performance by buyers and sellers can be further secured with mortgages against real property and secured positions in other assets.
  • Add an attorneys fee provision.  Also, consider adding a contract provision shifting the expense of attorneys fees to the breaching party in a contract.  That can sometimes change the calculus of a prospective breaching party.
  • Tighten your contract language. To lock buyers and sellers into real estate and supply contracts and leases, carefully consider ways the other party might find a contingency or loophole in their performance. Contingencies (commonly for inspection or financing) are the tunnel through which most buyers drive to walk away from a contract.  Ohio law provides that a buyer must “reasonably” attempt to fulfill a contract contingency, but many still attempt to use contingencies to artificially and intentionally avoid their legal obligations.  Fraud on the part of a seller (such as an undisclosed material defect discovered before closing) can also arguably be the basis for a buyer not performing.  Conversely, typically there are no contingencies to a seller’s performance under a contract.  But consider everything in the instrument — the date, the property description, the parties’ names, the “acceptance” language and timing, in considering how the other party might try to squirm away from their promises.

As the economy becomes more unpredictable and more dynamic in terms of pricing, supply shortages and interest rates, market participants would be wise to carefully think about the impact of inflation and interest rate hikes on their contractual obligations and market positioning.

 

 

Fraud, fraud and cyber fraud!

Author By Christopher P. FinneyPosted on

We all know of creative and incessant attempts to defraud us of our hard-earned money, many (but not all) internet- and email-based.  But nonetheless (i) the efforts of snooker us never stop, and (ii) we must constantly tell others in our family and our organization to be wary.  Eternal vigilance is a business and personal requisite these days.  The criminals are absolutely relentless.

Just this last week, our firm and my family were “almost” taken in by two of these international criminals:

  • Our firm (because we have a great web site and use internet marketing tools) constantly gets “new client inquiries” (usually via our web portal or regular email) from fraudsters asking us “do you review contracts?” or “can you sue someone for us?,” pretty generic and bland (but transparently fraudulent) inquiries.  I generally just “delete,” but one of these made it to one of our newer associates.  It was a client from Dubai who wanted us to assert certain contractual claims against another party.  We did so, and the matter instantly settled with a $385,000 certified check payable to our firm escrow account.  The fraudulent client then wanted us to wire the escrowed monies to him and a third party, both overseas (major red flag there!).  Fortunately, our crack bookkeeping staff saw the certified check was dishonored before we wired out the funds — disaster averted!.  But it was a close call.

[Something to note about these fraudulent inquiries: (i) they never want to communicate via telephone (but rather by email), (ii) the phone number they provide is always bad, and (iii) they always have some bland *@Gmail address.”  I sometimes respond to the email address they provide “please call me,” and they never do.  I call the phone number and it is bad for one reason or another.]

  • Sunday, right before the Superbowl, I stopped to have lunch with my wife.  She related to me that a piece of furniture she had for sale in Facebook Marketplace had sold to a buyer in California.  He was going to send us “certified funds” and then wanted us to pay his moving company to bring the piece to California.  “Wait a minute,” I said.  “why would we pay his mover,” and it vaguely reminded me of a fraud scheme I had heard from a client or read about on the internet.  Sure enough, I Googled “pay the mover” and found out this is a common scam.  You wire or pay funds to a mover, and later the “certified funds” are dishonored.  The victim is “out” the moving fee and the scammer never intended to pay for your furniture!  My wife told the would-be buyer that we would hold the “certified funds” for 10 days before shipping the goods, and he went radio silent immediately.  Fraudster!

Our firms, and our title company in particular, are attacked by fraudsters almost daily.  Fortunately, we are alert to the most common scams, and have avoided them all (we have clients who have not been so lucky).  But these two close calls — at the office and at home – remind us that vigilance is required and gullibility, and trust, in the internet era are simply foolish!

Be cautious with your funds and your property.  There are loads of fraudsters — some anonymous on the internet and some that you think are your friends — who will gladly and shamelessly steal your money and leave you wondering why you fell for their scam!

Be cautious!  Be aware!  Trust very few.

Should You Acquire a Business by Stock Purchase or Asset Purchase?

Author By Todd McMurtryPosted on

In the small business arena, companies are usually bought and sold in one of two ways: by stock purchase or by asset purchase. In a stock purchase, the buyer assumes ownership of the target company, acquiring all its property and taking on its debts and liabilities. In an asset purchase, only specified property is transferred and the target company continues to exist. Each method has advantages and disadvantages for both the buyer and the seller. If you’re planning to buy an existing business, your choice of method will depend on the purpose of the acquisition, the financial health of the acquired business and other relevant circumstances.

Stock Purchase

The foremost advantage of a stock purchase is that it promotes continuity of the acquired business. This method makes sense when the business is running well and there are valuable intangible assets like a trade name and goodwill that you want to preserve. All of the existing customer contracts, vendor agreements, debt obligations and employment agreements can likely continue without interruption.

However, stock purchases have inherent risks, since the buyer takes on all of the target company’s actual and potential liabilities. The buyer is responsible for paying off any outstanding loans, including mortgages and finance agreements. If, after the closing of the stock sale, the company is sued over something that happened previously, the new owners must defend against the suit and may have to pay damages and other costs. It is up to the prospective buyer to conduct a thorough examination of the target company’s books and operations. This is called “due diligence” and it takes significant time, money and effort.

Asset Purchase

An asset purchase can be of greater benefit for a buyer that only wishes to take over selected property without concern for keeping up the target company’s operations. It is also less risky. The purchaser takes over only the debts and obligations that are associated with specific assets purchased or that are voluntarily assumed, such as leases or contracts. This can greatly lessen the buyer’s need for due diligence and reduce its costs. There is also a tax advantage. The buyer acquires the assets on a cost basis and can immediately begin taking depreciation deductions, thereby lowering income tax.

One disadvantage of an asset purchase is that not all assets of the target company can be easily transferred. Even if customer and vendor lists are made part of the sale, contracts with vendors and customers may have to be revised or even renegotiated entirely.

Before purchasing a business, you should seek the advice of a qualified acquisitions attorney for help in deciding which method is right for your situation.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

How to Survive a Business Divorce

Author By Todd McMurtryPosted on

Nobody enters into a commercial venture anticipating that the enterprise will fail. Nevertheless, small and start-up businesses are particularly susceptible to dissolution or drastic changes in ownership. Relationships sour, peoples’ priorities change, someone gets sick or dies or the business suffers poor profitability or takes a different course than originally planned. There are innumerable factors that can lead to a dissolution or ownership change that is commonly known as a “business divorce.”

Like a dissolution of marriage, a business divorce can get messy and contentious. Company owners almost always have emotional attachments to a business that they manage hands on and may have founded. In addition, it’s common for small business owners to hold equal or nearly equal shares, making it difficult to agree on an exit strategy for any one of them. Every small business owner should be prepared to handle a potential breakup in a way that won’t disrupt or jeopardize the business.

Most importantly, you should have a breakup contingency plan in place. A comprehensive partnership or shareholder agreement should include a process for the orderly withdrawal or buyout of one or more of the owners. Written agreements can set out procedures to be followed and a method of determining suitable compensation. A competent business lawyer can help with negotiating and drafting an agreement appropriate for your organization.

Another element of an effective business divorce strategy is to be reasonable and level-headed. Just like marital divorces, business breakups can get very emotional, which can easily derail discussions and cause unnecessary harm to everyone involved and to the business itself. Infighting among owners can cause disputes to end up in court, which often leads to tremendous waste of valuable time and money.

Communication among the owners is also critical. A qualified business and commercial mediator can be of great assistance, getting the owners past the impulse to blame each other and to focus instead on the essential issues at stake — such as coming to a fair agreement concerning the firm’s assets and  liabilities. A mediator can be instrumental in keeping discussions on track toward a productive outcome.

Finally, the parties should decide what their priorities are moving forward. If the divorce is resolved fairly, there is a better chance that nobody will be unnecessarily harmed. For the departing business owners, it is advantageous to wind up the existing affairs so that he or she can concentrate on another venture. For those remaining, making sure the departing owner is well compensated, although expensive, is a way to avoid creating a disgruntled competitor. All involved should stay focused on achieving their long-term goals.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

1 … 6 7 8 9 10 … 31