Rush on Business : Iowa Corporate Lawyer & Attorney : Rush Nigut of Brick Gentry Law Firm : Serving Des Moines, Cedar Rapids, Davenport, & Sioux City

On Friday afternoon, March 2, at 4:30 p.m., I am interviewing Joe Cooney of Frannet on my BlogTalkRadio Host Channel.  You can listen live or catch it later as a podcast available on this blog or BlogTalkRadio.  You can even call the program if you would like to ask a question.  The call-in number is (646) 652-4878.  Generally, we have programs on Saturday mornings but this was the only time Joe was available.  If you are interested in franchising you will want to tune in.  Joe has a lot of great information to share.  If you are unable to tune in but want to ask a question please feel free to leave a comment below and ask your question.  We will do our best to get it answered.

Joe and I will be discussing the basics of buying a franchise including:

1. What is the franchising model of business?
2. What different types of franchises are available?
3. What do franchises cost?
4. What options are available for financing?
5. How do you lay the groundwork for success?
6. What to look for in a franchisor?
7. How do you research franchises to find the right one for you?

I encourage you to check out my other interviews with Adam Steen (financing entrepreneurial endeavors), Matt Ashburn (preparing a business for sale) and Brett Trout (electronic discovery and the new federal rule changes).

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How many blog posts about the former Playboy playmate actually provide valuable lessons on legal issues?  Well, Matt Gardner of Sullivan & Ward, P.C., whose blog provides information on Iowa estate planning and probate, tells us why Anna Nicole Smith's Will is not how you should plan your estate.  Matt believes there are some basic lessons we can learn from the Anna Nicole situation:

• Periodically you should review your estate plan, especially if there are significant changes in your life. Birth of a child and/or death of child and/or marriage qualify as "biggies".
• Use an attorney who understands estate planning and listen to any recommendations they may have for you.
• Don't get "cute" with your plans. You'll only create confusion and generate work for attorneys.

Looking for more information on trusts and estates?  You may also want to check out the Ohio Trust & Estate Blog from Michael Bonasera.  One of Michael's most recent posts is planning on the passing of personal property.  Thanks for including me on your blogroll, Michael.  Keep up the good work.

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Rush on Business Podcast No. 3 is an interview with Adam Steen of Transition Capital Management of West Des Moines, Iowa.  Transition Capital Management recently started the Society of Entrepreneurial Minded Executives (SEMEE) event in Des Moines.  I attended the last SEMEE event and believe it offers tremendous opportunities for growth companies to network with other business owners and potential investors right here in Iowa.

Listen to the podcast here. (It's free!)  Click on my BlogTalkRadio Host Channel Page.

In this podcast Adam discusses issues such as:

1. The SEMEE event and its value for businesses and investors in Central Iowa;
2. Debt v. Equity Financing;
3. Growing an enterprise business rather than just buying a job;
4. The considerations of venture capitalists when determining whether to invest;
5. How equity investment can work for your business;
6. Tips on how new business owners can start and grow their business;
7. There is more money out there in the Midwest chasing good companies than there are good companies. 

For more information on SEMEE be sure to contact Adam by email (asteen@transcm.com) or by telephone at 515-309-0142. 

Listen to the podcast here. (It's free!)  Click on my BlogTalkRadio Host Channel Page.

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In the past I have written about how to hire a business attorney and an accountant for your Iowa business.  Another important professional you will need to work with is an insurance agent.  (We'll save bankers for another post).  An insurance agent that writes policies for businesses is an important professional advisor in your business. 

You can protect yourself from large, unknown losses by acquiring the appropriate insurance.  Also shareholders and partners sometimes take policies on each other's life, so that the surviving shareholder or partner can buy out the interest of the deceased shareholder or partner.  Moreover, even corporations, LLCs and other limited liability organizations should have insurance coverage to provide greater protection of assets.

This article from the Small Business Administration discussed business insurance and types of coverages you should consider.  A couple of things worth noting from the article.  FIrst, notice that home-based businesses are not typically covered by homeowners' insurance.  Second, the list of insurance coverages in the article does not include employee practices liability insurance (EPLI).  If you have employees, EPLI insurance may help protect against claims of discrimination, harassment, wrongful termination, breach of employment contracts, etc.  But make sure you understand what is covered by such policies before you purchase the coverage.  The exclusions in some of these policies are plentiful.  You need to understand what is covered and what is not to determine whether it is worth the premium.

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In a recent post New York small business lawyer Imke Ratschko points out that one of the reasons to choose an S corporation over an LLC is the possibility to save on employment taxes.  She also links to a helpful article written by Stephen Nelson, CPA on how to save taxes with an S corporation.  Make sure to read both articles.  If you are dealing with tax issues be sure to get advice from an accountant or tax attorney.

I encourage anyone who has not already done so to explore the New York Small Business Law Blog.   Imke routinely shares great insight and resources on her blog including information about New York incorporation and LLC formation and other topics that are helpful for any small business owner.  It is one of the best small business law blogs in the country. 

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Employment Law Colorado blog has an interesting blog post on a former employee suing IBM for his Internet addiction.  The lawsuit is based upon a claim that IBM violated the Americans with Disabilities Act.    Although many bloggers' spouses may disagree, Internet addiction is not currently recognized as a true addiction.

This Findlaw article examines the viability of the lawsuit.  Surprisingly Internet addiction lawsuits are something employers could see more of in the future.  So shut off those Blackberrys now.

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Forbes.com opinion writer Daniel Lyons sure doesn't think much of the settlement between the Iowa Plaintiffs and Microsoft in an article in which he links to Rush on Business.  His quote:

"I'm sorry, but I can't work up any outrage over having to pay $100 for the student edition of Office.  And though I'm not a fan of Windows, I've managed to discover an alternative.  It's called an Apple Macintosh.  You can buy them online or in stores."

It seems as though most business people tend to hold this view but I am confident the settlement reached will be substantial - albeit less than the $330 million plaintiffs were requesting.  So, who won you ask?  Perhaps Iowa schools, as Microsoft will donate half of any unclaimed settlements to the Iowa Department of Education for use by public schools.  In the Minnesota case, more than $100 million was unclaimed out of a $175 million settlement and the schools received more than $50 million.

Did Iowa consumers get a victory?  I'll leave that up to you but most people I know aren't getting warm fuzzies over this one.      

Update:  A somewhatmore flattering post about Roxanne appeared in the Wall Street Journal Law Blog yesterday.  She was the Lawyer of the Day.

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The Greater Des Moines Partnership has started a new business accelerator called BIZ - the Business Innovation Zone.  Michael Colwell, a marketing professional with experience in product development has been selected as the executive director.  BIZ is expected to start up at the end of this month.

The business accelerator has been funded through a grant from the State of Iowa and matching funds from Iowa business development and education groups.

So if you have a new idea for the next great business you might consider giving the Greater Des Moines Partnership a call.  Perhaps Mr. Colwell would even agree to do a Rush on Business Podcast to tell us more about this exciting opportunity for regional business people.

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The Iowa consumer class action case against Microsoft has settled.  Check out Des Moines patent lawyer Brett Trout's blog post for details.  I'll post more on the settlement at a later date.  Details of the settlement are confidential and will be announced this spring after court approval.

I'll bet there are some happy jurors on this Valentine's Day.

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Des Moines patent lawyer Brett Trout is the featured guest on the Iowa Business Hour with host Jim Goodman this Wednesday, February 14th.  The show is from 7:00 - 8:00 p.m. on 98.3 WOW FM.  Brett is always entertaining and informative.  I highly recommend his book, Internet Laws Affecting Your Company.  If you don't have any special Valentine's plans you should tune in.

The Iowa Business Hour focuses on the 4 M's of successful business, namely: Money, Management, Marketing and Model. Host Jim Goodman is President of Emerging Growth Group (EGG), an investor-backed for-profit Des Moines area business development company.

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It was an interesting evening at the SEMEE event tonight.  Several new businesses presented their stories and it was exciting to see so many people in the audience who care about entrepreneurship in Central Iowa.  Thanks to the Steens of Transition Capital Management for organizing the event.

The star of the show?  Undoubtedly Charlie Anderson.  Charlie is a dynamic speaker who sells Guidry's Cajun style pork sausage which is made from his mother's generations-old receipe.  After seeing this guy present I know there will be a whole bunch of people running out to the local Hy-Vee to grab themselves a taste.  What I enjoyed most about Charlie's presentation is that he told his story from the heart and did not rely on the dreaded powerpoint.  The other presenters and many of us in the audience likely learned a thing or two from Charlie in how to capture an audience.  Charlie has a future as a motivational speaker once he is done selling pork. 

It was also nice to see the guys from US Rodeo Supply demonstrate their online success through the use of NetSuite.  Matt and Nathan Owen run their business from a small storefront in Truro, Iowa and have developed quite an online presence including their own blog, Spur'N Conversations.

Finally, I enjoyed the talk from Barbara Rasko of MakeMineWine Magazine.  The statistics regarding the growth of the wine industry in Iowa are impressive.  I know Governor Chet Culver wants us to become the Silcon Valley of alternative energy but the highlights of the Iowa wine industry are pretty amazing.

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The second meeting of SEMEE ("Society for Entrepreneurial Minded Executives") is tonight at the EMC Insurance Building in downtown Des Moines.  The meeting starts at 7:00 p.m.

For details, please check out Adam Steen's Growth Capitalism blog.  More information is also available on the Iowa Biz Events Web site.

The event involves presentations by four or five of high potential enterprises seeking specific resources in order to grow.  It also will include a presentation by a local economic development group discussing a new innovative strategy.

If you are interested I encourage you to attend. 

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Rush on Business Podcast No. 2 is an interview with Matthew Ashburn of Sunbelt Business Brokers with offices in Ankeny and Cedar Rapids, Iowa.  Matt is a professional business broker with Sunbelt.  He is 1 of only 2 brokers in Iowa designated by the International Business Brokers Association as a Certified Business Intermediary. 

Listen to this podcast by going directly to my BlogTalkRadio Host Channel Page.  (It's free!).

This podcast covers the importance of preparing your business for an eventual sale.  Matt says the key is not to wait too late.  Matt advises that business owners begin sale preparation at least 2 to 6 years before intending to sell the business.  This podcast covers issues such as:

1. How to prepare the business for sale;
2. Why is it important for an owner to consider personal motivations;
3. What advisors should you talk with;
4. The importance of continuing to run the business even though it is for sale;
5. What aspects should an owner consider from a buyer's point-of-view;
6. Valuation issues;
7. Why you need to disclose the warts of your business.

Listen to this podcast by going directly to my BlogTalkRadio Host Channel Page.  (It's free!).

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Nascar is big business and its biggest star is undoubtedly Dale Earnhardt, Jr.  Dale Jr.'s contract is set to expire at the end of the 2007 season and he is now requesting a majority ownership in his father's namesake company, DEI.  DEI is run by his step-mother Teresa Earnhardt.  Dale, Sr. may have left her in charge but Dale, Jr. appears to be holding the cards. 

But can you imagine this happening in any other sport?  (Yes, I do consider Nascar a sport).

• Do you think Peyton Manning will request majority ownership of the Colts?
• Did Michael Jordan demand majority ownership of the Bulls?
• Did Babe Ruth get majority ownership of the Yankees?

  What about Nascar itself?

• Are Gordon and Stewart entitled to majority ownership of their race teams?  (Gordon does have some ownership).  And what about Jimmie Johnson then, isn't he left out in the cold with Gordon owning a piece of his car.  (Cup Champions all, something Dale, Jr. has not accomplished).
• Even imagine if Dale, Jr. were driving for Childress right now?  Could he reasonably demand majority ownership?

In the business world does the owner give up majority ownership to the star salesperson just because they threaten to go somewhere else?   And this is business after all. 

So after all these examples you might imagine I would advocate that Teresa should send Dale, Jr. packing, right? 

Wrong.

Sure his father built DEI.  But Dale, Jr. is DEI now.  And 49 percent of a substantial sum of money is a whole lot better than 100 percent of a much smaller amount. (Of course, keep in mind Dale, Sr.'s licensing rights still bring in millions).  But there is no replacement for Dale Earnhardt, Jr.  After all, hasn't she seen the number of beer cans that have been thrown at Talladega over the last couple of years when he hasn't won? 

As Tony Stewart said, "DEI without Dale Earnhardt, Jr. is a museum." 

I say give him the keys to the garage.  He has earned it.

Read what others are saying.  Here, here and here.

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Generally, the easiest way  for a buyer to purchase a business is through an Asset Purchase Agreement.  The buyer is not actually purchasing the business itself.  One commentator has described it has buying the seller's merchandise without buying the store.

Buyers tend to favor asset purchases for several reasons.  First, the buyer obtains the seller's assets without assuming the liabilities of the business.  Second, the buyer gets a "stepped up" basis on the assets being acquired which is helpful to the buyer from a tax perspective.  (This is where the buyer's basis for depreciation is the allocated purchase price of the transferred assets).  Sound complicated?  Trust me it is a good thing for the buyer.  Third, the buyer can pick and choose which contracts of the business to assume.  Fourth, a buyer may or may not hire the employees of the seller.

Now a seller may want a stock sale, particularly if the business is a C corporation.  In this case the buyer is purchasing the business entity itself.  If the seller owns a C corporation an asset sale may result in double taxation for the seller.  (Never a good thing).  Under those circumstances the corporation will pay tax on the gains of the assets sold, and then the shareholders will pay capital gains tax when the corporation is liquidated.  But with a stock sale, the seller will only pay the capital gains tax on the sale, generally at a 15% tax rate (at least until 2010).

One point to consider in the negotiation of an asset purchase or stock sale is that the potential tax liability for the seller may be greater than the savings to the buyer.  So a seller may want to consider adjusting the purchase price slightly in order to gain the tax savings from a stock sale.

For more information on this subject check out this helpful article from CCH Business Owner's Toolkit .  If you have questions regarding whether you should make an asset purchase agreement or stock sale please be sure to consult your tax advisor and/or a business attorney.

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If you are selling your business you should not divulge trade secrets and confidential business information without a signed confidentiality agreement.  The theft of trade secrets is an increasingly litigated issue.  In the business sale context this often happens when negotiations break down and the potential buyer decides they can start their own business.  It is important for the confidentiality agreement to include the right to obtain an injunction, damages, and attorneys fees in the event of a breach.

The first step in selling your business is to protect yourself.  I also recommend you contact a business lawyer before you enter into any agreements or provide trade secrets and confidential business information. 

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When forming small businesses I am sometimes asked whether the owner(s) must form a board of directors consisting of members from various backgrounds who are not actually owners of the business.  While it may work in certain situations, I have not seen this model work real well for most small businesses.  By their very nature, many small businesses are highly entrepreneurial and generally the owner(s) does not want consult a board for approval or have the board looking over their shoulder on every move.  Generally, it seems most small business owners choose to limit their board of directors only to the owners of the business.

But isn't the advice of others (often more experienced entrepreneurs) helpful to the business owner? 

One possible solution is to form an advisory board.  The advisory board does not need to be anything formal and the members do not actually need to meet at the same time.  The advisory board may simply be a collection of individuals you ask for advice on a periodic basis.  We all could use mentors.  An advisory board can be a great way to receive input from others without giving up any power in the decision making for your business.  For advice on how to form advisory board for your business check out this article from Kaufman eVenturing.

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Believe it or not, as a small business lawyer I have named more than my fair share of businesses for clients.  (Maybe I should add that to the list of incorporation services).  I always kind of laugh when I am asked for my opinion on the subject because I am not a marketing, advertising or branding expert - professionals that may actually get paid for coming up with a business name. It also makes me wonder how often do doctors name babies?

But the truth is business owners should take great care in naming their businesses.  I found this article with 18 insights on naming your small business.   You may also want to check out my past post on how to name your Iowa small business covering some of the legal considerations. 

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Today I had a discussion with another attorney about the the pros and cons of franchising.  We determined that while many business owners may think they want to franchise, it is often not the best alternative for their business.  If you are interested in the topic you may want to check out this article on whether you should sell franchises or build a chain of company-owned locations.  It is worth the read.

You may also want to read my article on 12 things to consider before franchising your business.

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