Iowa Secretary of State Increases Corporate Biennial Report Fees Beginning 2018

As my clients probably noticed this year, the Iowa Secretary of State increased the corporate biennial report fees for Iowa Corporations in 2018 from $30 for online filing to $45. Iowa LLCs will have the same increase in 2019. My understanding is that the increased fees is an effort to pay for business technology upgrades. The increase is set to expire in 2022, at which time the fees are expected to revert to the previous amounts.

UCC filing fees increased as well with electronic filings increasing from $5 to $10.

 

KEY LESSONS OUT OF THE SHARK TANK WITH BARBARA CORCORAN

The #DSMUSA business community had the distinct opportunity to listen to Barbara Corcoran of Shark Tank fame at their Annual Greater Des Moines Partnership Dinner. For me, the talk was extremely insightful and also confirmed many of the lessons I have tried to teach on this blog and to clients over the years. I have always been naturally cautious about founders seeking venture capital and angel investors. After all, over the years I have seen my fair share of legal issues between those founders and investors. Corcoran talk did nothing to change my views but I do understand that investment is often necessary and helpful so let’s get straight to some of the key points I gleaned from her talk:

  1. If you are seeking venture capital be honest and be prepared. Corcoran explained that only about 50 percent of the deals on Shark Tank get funded (with the exception of Mark Cuban who apparently funds 100 percent of his deals). Why? Because the show works in reverse order. The Sharks hear the presentations and come to a deal before due diligence is conducted. What does due diligence reveal? Quite often reality is much different than the presentations. Due diligence may reveal that the company does not actually hold its patent, the business may not actually even have sales or perhaps there is no real business plan in place.  The key take away is that you must have your ducks in a row if you expect to seek venture capital. A promise from someone to buy your product is not the same as actual sales. Be honest and prepared!
  2. Even if you get funding, your business is likely to fail. Yes, let’s repeat that. Even if you get funding, your business is likely to fail. Corcoran gave a startling statistic. She said that only about 10 percent of the businesses funded on Shark Tank actually are in business just three years later. I’ll admit, I thought with the Shark Tank marketing machine, and access to some great entrepreneurs, the number of successful businesses would have been much higher. But it is critical for people to know, being an entrepreneur is not for the faint of heart. When the lights of Shark Tank dim, and the hard part begins, most entrepreneurs can’t make it work. Same is true for businesses outside of the Shark Tank realm. Far more entrepreneurs fail than succeed. But what is one way to increase your chances of success? Actually sell your product before starting your business. Is there a prototype you can build? Is there truly a market for what you want to sell? Pre-sell your product!
  3. Entrepreneurs must be tough and resilient. Corcoran says she is always looking for the tough entrepreneurs who can stand their ground. Don’t just cave to investors whims. Stick to your guns! I have seen founders cave time and time again just to get investment. And rarely do those situations work out. Have a plan, be prepared and be willing to walk away if you don’t get the right deal. Corcoran says she has had the most success with people who have been “injured” because these people know failure but have the ability to bounce back when the going gets tough. And inevitably there will always be a rough patch. Those who are unable to bounce back quickly are rarely successful, no matter how smart they might be or how prestigious the school was that they attended.

Overall, I really enjoyed Corcoran’s story about her career and her insights. If you don’t already attend, I encourage you to attend the Des Moines Partnership dinners in the future. There is always a great speaker and its always a great networking event as well.

Franchise King Shares Top Franchise Trends and Predictions for 2018

For this week’s franchise post I thought I would share an interesting article from Joel Libava a/k/a “The Franchise King”. Joel recently wrote his Top Franchise Trends and Predictions for 2018. It is really an insightful look at the industry and a good read for franchisors and prospective franchisees alike.

One of the more interesting subjects in the article to me relates to Subway. Joel talks about how Subway has been having big issues. Yes, even established (correction: even the most established) of franchises have issues. Everyone is better off knowing that fact!

If you are interested Joel’s franchising blog is one to follow.

Starting a Franchise Company? Have Systems and Investment Capital in Place

I have received a number of calls recently about starting a franchise operation. On the one hand, it is awesome because the interest in franchising among Iowa business owners definitely seems to be growing. But on the other hand, most of these business owners are not ready to begin the leap into franchising just yet.

A lot of times a prospective franchisor might be getting a lot of encouragement from customers saying, “you should franchise!” While that’s wonderful often the prospective franchisor is operating only a single location, does not have adequate systems in place, and perhaps most importantly, lacks the investment capital to really make a franchise work.

The backbone of any successful franchise company is systems. You will need to create and completely document the systems that a franchisee will use to run their business successfully. You will need to create a training program that will teach a new franchisee what they need to know to become successful. You will also need to develop marketing plans that a new franchisee will use to obtain customers. And since you will now be in the “business of franchising” as opposed to your “former business”, you will also need to have systems that you can use to recruit new franchisees into your franchise company. There is a TON of work to do. You may be able to hire outside consultants to assist with all this work, but if you do, you are definitely going to pay significant dollars for that assistance.

Which brings me to the next point. You need considerable capital to get a franchise system off the ground. You will need to have a franchise disclosure document and franchise agreement written hopefully by an experienced franchise attorney. You will also need audited financial statements produced by an experienced accountant. You will need an operations manual that sets out your systems for a franchisee to run their business. All of this takes a significant investment on your part, and not only in terms of money,  but also time.

It takes lots of time, effort and money to get a franchise off the ground. There are a great deal of other factors that I have not even mentioned in this blog post. It is just the tip of the iceberg. It is not something to take lightly. It can be a great model for business but it is usually for the business owner who already has experience in managing multiple locations with great systems in place and significant investment capital at their disposal.

Sexual Harassment Claims will Continue to Climb in 2018

2017 was a watershed year for the publicity of sexual harassment claims. Time Magazine even named its “Person of the Year” as the Silence Breakers. Business owners should expect those claims to become even more prominent in 2018 as the masses, not just celebrities, begin to break their silence as well. Just yesterday, I saw a headline about a sexual harassment case locally involving two female teenagers that decided to come forward. In years past, I would say most teenagers would have feared bringing a sexual harassment claim. But this trend is here to stay and that’s undoubtedly a good thing overall for our workplaces.

Employers have an obligation to prevent sexual and other forms of harassment in the workplace.  At times employees will screw up but an employer must be prepared.  Some ways to avoid harassment claims include the following:

  • Have a written policy against harassment which should include an anti-retaliation provision for those employees who report harassment.
  • Provide and communicate in writing multiple channels for your complaint procedure. Employees should be able to report harassment to more than one person within the company.  The complaint process should be clearly defined in your employment manual.
  • Make sure you train supervisors each year and require supervisors to report harassing conduct.
  • Once notified of harassing conduct – take immediate action to investigate fully.
  • Do not retaliate against employees that make a complaint.
  • Discipline or terminate the offender as appropriate.

Also on this subject I saw an informative post from Marvin Kirsner of Greenberg Traurig that sexual harassment settlements with nondisclosure agreements will not be deductible under the new tax law. This  is definitely something to keep in mind when settling such lawsuits. Of note, attorneys’ fees will also not be deductible if nondisclosure agreements are used in the settlement.

 

 

Protect Your Confidential Business Information

I often see cases involving the theft of confidential business information by former employees. Attorney Eric Roth has some helpful tips in a recent blog post on how to deal with the problem.

The main take away reminder in my opinion is to take action to protect your trade secrets BEFORE it becomes a problem. As an example, develop confidential information policies in your business to take steps to protect your information including restrictive covenants and send a reminder letter to departing employees of their obligations not to use the confidential business information or violate any non-compete agreements. Conducting a review of a departing employees’ emails is an excellent place to start in order to find out whether confidential information is being downloaded or taken by the employee. Another good idea is to have an exit interview with employees where they return all materials and where you discuss the continuing obligations to your business despite the end of the employee relationship.

Protecting your confidential business information is critical for most employers. Take steps to protect that information now before it is too late.

Roles of Shareholders, Directors and Officers in Closely Held Businesses

I came across this blog post from the Family Business Advocates Blog and thought it was worth sharing. The post describes the various roles of shareholders, directors and officers in closely held family businesses. It’s good information on a topic that is often misunderstood by small business owners.

Read the post here.

Iowa Governor Branstad to Cut $7.7 Million from Judiciary Budget

Governor Branstad announced his proposed budget yesterday with $110 million in cuts. This includes $7.7 million in budget cuts for the judiciary.

The budget cuts in the judiciary are alarming. Today, Chief Justice Mark Cady will give his state of the judiciary address. It will be interesting to hear his comments based upon the fact that past cuts have already thinned out resources for our judicial branch.

I’ll be frank. I did not know there was $7.7 million left to cut from our judicial branch based upon past cuts. Iowans need access to judiciary services and the governor’s proposed budget threatens access to justice for our citizens. This will be a challenge for our judiciary to say the least.

Best Lawyers in America® Recognition for Brick Gentry Lawyers

Several Brick Gentry lawyers were recently recognized by Best Lawyers in America® for 2016-2017.

See the full article here.

Rush Nigut was named one of the Best Lawyers in America® in three categories including:

  • Business Organizations (including LLCs and Partnerships) (Firm receiving a Tier I rating);
  • Closely Held Companies and Family Business Law
  • Franchise Law (Firm receiving a Tier I rating).

Best Lawyers® is the oldest and most respected peer-review publication in the legal profession. Since the first published edition in 1983, it has grown to be widely recognized by clients and legal professionals alike as a significant honor and the most reliable source of legal referrals. The 23rd Edition covers all 50 states and the District of Columbia, and inclusion is based on more than 7.3 million detailed evaluations of lawyers by other lawyers.

Square One DSM Startup Stories to Feature iEmergent

Laird Hedlund Nossuli, CEO, and Bernard Nossuli, COO will join Mike Colwell for the September edition of Square One DSM Startup Stories to share the tale of a vision conceived and brought to life by company founder and Laird’s late father Dennis Hedlund.

I have had the good fortune of working with this company and its executives. Their story is good one.

Here is an excerpt from the Square One DSM press release:

A fairly circuitous path led to the creation of iEmergent and its cloud based tool, Mortgage Market Smart. Dennis Hedlund, after many years as an executive in telecommunications and mortgage companies, saw an opportunity to apply the forecasting methods he had developed for large call centers to quantifying future market opportunities for mortgage lenders. Taking the entrepreneurial leap, he left Wells Fargo and began studying decades of data from a wide variety of public and private sources. He identified unique patterns that would ultimately lead to the development of the iEmergent forecasting model…

Diversifying over the years through product development and service offerings, they have penetrated not only the large national businesses and regional lenders but are now targeting the smaller community institutions with data, products and resources that are tailored to each institution’s size and complexity…

Laird, along with her sister and mother initially joined her father in his pursuit of growing the company. Although both sisters would step away for a while to continue their educations, circumstances called Laird to take the helm as CEO, with the illness and untimely passing of her father. “I had to take the reins in a way I was not at all prepared to do,” confesses this Swarthmore graduate in Religion, who also holds a Masters in Social Work. As she reflected on those challenging times, Laird states “you just keep moving forward, staying true to your goals and your visions,” foreshadowing some of the insights she can share with the Startup Stories audience…

Laird’s husband Bernard came on board as COO at the time of her father’s illness, taking his own entrepreneurial leap leaving a position at DuPont, to help the company continue. “While it is something of a double edged sword, being small and nimble has served us well,” he adds, anxious to share the value they have found in augmenting their in-house skills as needed through outsourcing, consulting and contracting.

Details on the event:

$15 admission fee (includes lunch) or free (if you don’t want lunch).

11: 30 a.m.
September 21st 2016
Greater Des Moines Partnership

700 Locust Street, Suite 100

Conference Center (street level)

Purchase your tickets/make reservations – http://members.desmoinesmetro.com/events/details/september-startup-stories-53786

Contact at info@squareonedsm.com for more information.

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