Challenges in Acquiring Capital, Loans, Private Equity or Venture Capital and Developing an IP Strategy!

Small Business Owners are required to perform multiple tasks to acquire the capital or funds required to grow, expand and hire new employees.  One of the most challenging tasks of being a Small Business Owner is to ensure that you have the resources required to improve operations and efficient services.  Without taking the time to improve the quality of the products or services you provide, you will eventually come to a point where there is a need for you to churn clients.

However, if, you take the time to negotiate good loan agreements, private placement memorandums, develop intellectual property portfolios, form strategic alliances and partnerships with key suppliers and customers, then you can find ways to grow at a faster clip.  Unfortunately, to avoid some of the inherent business and legal risks you may need to be careful with how you negotiate and sign a personal guaranty, ensure that there are key security provisions to allow the Small Business Owner to maintain control, making sure that you allow for employee compensation to be based on essential performance metrics or objectives, and development of key competitive advantages.

The following is a list of the top five methods for each Small Business Owner to place themselves in the right position for growth, scaling and innovation:

1) Limiting the amount of debt and personal liability of each owners or guarantor;

2) Ensuring against loss of operational controls by using non-dilution provisions, developing multiple classes of equity with different voting rights, maintaining the key board seats to ensure that you or capable and trusted executives and officers are in key employment positions;

3) using robust intellectual property acquisition strategies and strong enforcement mechanisms or policies to develop barriers to entry and follow through products and services;

4) developing good equity ownership plans (ESOPs) and performance based compensation plans; and

5) developing good operational manuals, guides, checklists and forms to assist with efficient delivery of products and services to clients.

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Managing the Risks of Litigaiton is one of the Hardest Challenges for Small Business Owners-Corporate Formalities, Commercial Insurance and Good Operations Procedures are Vital!

One of the easiest ways to manage the risk of litigation is to make sure that your small business has a separate legal existence from you and your personal assets.   This means form an S-Corporation, C-corporation, a Limited Liability Company, a Limited Partnership or a Limited Liability Partnership.  A sole proprietorship form or a simple doing business as registration is not good enough.

Creating a separate legal entity for your business and following the corporate formalities, such as, creating shareholders agreements, by-laws, annual resolutions, registered agents, stock certificates, operating and membership agreements, acquiring a Federal Employer Identification Number (FEIN), and Illinois Department of Revenue (IDOR) Registration numbers and a Chicago Business License are some of the ways to help protect you from personal liability.

The next major investment should be a good commercial liability and worker’s compensation policy.  This is the minimum required to help make sure that your company or small business is able to satisfy its own debts without being underfunded.  If the corporation is underfunded, then you may expose yourself to a piercing of the corporate veil and be personally liable for its debts.   Moreover, there should be no commingling of corporate and personal assets, bank accounts, loans, debts, revenues, credit cards and similar assets.

Next, you should file your annual report and prepare annual resolutions for any major decisions you make.  Finally, make sure you have an attorney serve as your registered agent for service of process. This will enable you to have your attorney get involved early in the litigation phase of the dispute.  The earlier you get an attorney involved the more he or she will be able to do to protect you personally and your small business.   Creating good employer practices and policies, and business operations procedures will help further reduce the risk of litigation.

However, understand that the lawsuit is just another part of doing business, it is something that every business owner will face at some point in their life.  Thus, make sure you create a good process for investigating and responding to consumer complaints, employee complaints, vendor complaints, and you will be able to prevent the matter from escalating to a lawsuit that is filed with the Courts.

If you have any concerns or questions about your small business and managing the risk of litigation, then please let us know at:

What should you consider in buying a business? How can you help prevent buyer’s remorse?

There are a number of items to consider that can vary, as much as, the number and types of businesses in the economy.  However, there are some common issues that all buyers or buyer’s attorneys should consider, such as the following:

1) the tax consequences for the buyer and the seller; 2) are there gains that the buyer will have to report and has the seller made estimated payments to cover the additional tax iiability; 3) three to five years financial statements for the business will help you and the buyer learn the most about the seller’s business; 4) the financial statements should be reviewed by an accountant to determine the value of the business; 5) the buyer should be particularly careful about off the book issues or footnotes in the financial statements; and

6) some common off the books items to watch out for are the following:

a) debt that can be converted to equity; b) any lease agreements; c) unrecorded short or long term debt; d) restrictions on transering ownership of business or its assets; e) employment agreement of key managers; f) agreements with key consumers; g) unrealized contingent liabilities;  h) stock options; I) sources of raw materials; k) changes to distribution and sales channels; and l) seller’s ability to compete with buyer post closing.

Obviously,  you cannot anticipate ever risk, but  knowing what to look for can help you prevent buyer’s remorse. If you have any concerns or questions, then please contact us at:

Employment Regulations and Corporate Strategy: There are many ways to comply and reduce the risk of Employment Claims or EPL Premiums!

Many small business owners do not take the time to develop a comprehensive corporate, ownership, accounting, and tax and employment strategy.  There are a variety of ways that small business owners shoot themselves in the foot by commingling funds, sharing or leasing employees, failing to acquire adequate WC coverage or EPL.

The affiliation and ownership structures of S-Corps, LLCs, partnerships and C-corps make a difference in determining the employee head counts for the FLSA, the IHRA, the ADA, the ADEA, Title VII, the IWPCA, and a variety of related employment law regulations.  It is important to make sure that your attorney, accountant, bankers, and commercial insurer are on the same page. Moreover, the payroll services provider should also be included to ensure that there are adequate record keeping procedures in place.

However, most small business owners tend to be penny wise and dollar foolish.  Thus, they tend to always opt for the lowest cost service provider and require more assistance in the long run.  We have often had to help entangle the mess that small business owners have found themselves in after going with Nolo, Legal Zoom, CSC or a general practitioner without the expertise in accounting, corporate, tax and employment matters.

Most of the time the Small Business Owners have to pay more to entangle a mess than if, they would have initially complied with the applicable regulations.  Of Course, if you have any concerns or questions, then please contact us at

Common Mistakes of Most Small Business Owners: failing to value themselves, their employees, and their operations procedures!

A common mistake that most Small Business Owners make is that they underestimate their value, their employee’s value and their operations procedures.  They do not think that there is anything special about what they do or how they do it.  For them, operating their business comes as second hand or just a matter of habit or routine.  However, not everyone thinks the way a Small Business Owner does.

Most people have to be provided incentive and motivation to do their work.  Employees need to know that they are going to be rewarded for their hard work and provided operational guidance.  Employees cannot read your mind and you may be very good at anticipating what your customers want, but not everyone is.  One of the easiest ways to increase the value of your small business is investing in the following: 1) operational manuals; 2) training and education for your employees; 3) creating performance incentives and bonus plans for employees; and 4) identifying opportunities to have different personnel take on leadership roles.

Small Business Owners also always are willing to give their most valuable resource away freely to clients, employees and others.  As a Small Business Owner your time is actually more important than anything else. It is your most scarce resource and should be valued above anything else by you.  So, the more time saving procedures your implement into your operations, your manuals, training of employees, and software and technology tools–the more you will be able to generate value for your business.

In addition, a good lawyer and business partner can help you leverage your operations manuals to generate trade secret rights, prevent employees from competing and stealing your customers, develop advertising and branding value, a corporate strategy to reduce tax liabilities, and protect valuable relationships with customers and key vendors.   Working with a good small business attorney and partner can be the difference between scaling your business and being able to retire someday.

The more time you have, the more you can do to grow and solve your small business’ problems.  At the end of the day it is your business–not your employees…so the buck still stops with you!

Agreements or Contracts with Independent Contractors or Employees: Do I need them and why?

Many Small Business Owners do not take the time to draft and prepare agreements with their contractors and employees.  Unfortunately, many do not realize the value of having an independent contractor and employment agreement with their contractors or employees.  The first benefit to having such agreements or contracts is setting clear expectations with your contractors and/or employees.

For example: who keeps the intellectual property rights to what the contractors or employees develop?  Can your contractors or employees work for your competitors?  Can your contractors or employees go work for your clients?  Can your contractors or employees take any of your operational materials or client materials to a new job?  How are the contractors or employees going to be paid? Who is responsible for payroll taxes, worker’s compensation insurance, health insurance, and a variety of similar matters? Is the relationship at will?

These are just some of the concerns and questions that arise in every businesses relationship with its contractors and employees.  Without a good agreement or contract in place, there is room for misunderstandings about what your contractors and employees are entitled to and what they are prohibited from doing.  Until your small business gets to a certain scale of operations, it is often susceptible to disruption of its operations based on disputes with contractors and employees that can be avoided via good agreements or contracts.

If you have any concerns or questions about protecting your business operations, contractor or employment agreements or contracts, then please feel free to contact us.

Maximizing the Value of your trademark and protecting your online Brand!

What is a trademark? A trademark is an indication of the source of certain good or quality for products or services.  Technically, if you are providing services under a particular design, name, logo or color, then it is a service mark.  The importance of trademarks is that they signal product or service quality or originator of the product or service.

It allows consumers to make a choice and rely upon their past experiences with a product or service provided under a specific logo, name, design or color.  This signaling or distinctive function of trademarks are the key to protecting them and decreasing your customer acquisition costs.  The more well know your trademark or brand the easier it is for customer to find you and rely upon the signaling function of your trademark.

Building notoriety around your trademark can also help you protect your right to acquire certain domain names, prevent others from using your mark in their SEO processes, and help increase your SEO ranking.  In the ecommerce, world your online brand is often more important, then having an entire sales department. For small businesses that have limited advertising budgets it is very important to maximize the return for every advertising dollar.  Small business owners can benefit from a strong trademark and online brand protection strategy.

If you have any concerns or questions regarding building your trademark portfolio or online brand, then please feel free to contact us.

Common Mistakes and Traps That Small Business Owners Fall Into!

Most small business owners are so busy trying to find and get work done that they really do not make the time to grow their business.  They do not think about increasing efficiency in their mode of operations or method of conducting business.  They do not think about how creating operational efficiencies will help them create better products and/or services for their clients.

They do not plan for the future and often put off much needed items, such as, creating manuals, job descriptions, training methods and other knowledge transfer mechanisms that will help bring someone up to speed on the work that needs to be done.  This makes it very hard for small business owners to step away from the company or business without disrupting their method of operations or the quality of products and services provided to clients.

However, making the time to create knowledge transfer mechanisms and budgets for expanding and growing your business will allow you to manage your growth and be able to enjoy the fruits of your hard work.  The more time you invest in training your employees, making your operations more efficient, the better the products and services you will be able to provide to your consumers.  Another important part of being a small business owner is knowing when you are lacking the skill or expertise in a particular area or industry.  If you are honest with yourself about your shortcomings, then you are able to acquire partners or professionals that can provide the expertise that you are lacking.

If you have any concerns or questions about growing your small business and managing the business and legal risks, then feel free to contact us.