Why Do 80% of Businesses Fail In Their First Year?

rows of silouhettes of diverse peopleEric is really angry. Less than a year ago, he started a business with four guys he knew from friends of friends. They shared the dream of opening a sports bar dedicated to soccer that would serve international beer and bar food.

They found the perfect spot and signed a lease. Eric personally guarateed the lease and put $30,000 down for a deposit. He paid for all the kitchen equipment and hired a contractor to bring the building to code.

His partners (they were all equal according to the one page document he typed up) chipped in for a little while. One brought in some TVs. Another bought some beer and tended bar sometimes. Another pitched in a few thousand dollars to buy some advertising to announce their grand opening.

After a month, the first partner was run out by Eric after taking cash from the till. He never came back.

Then one of the partners got sued for pinching the waitresses. Eric became embroiled because they were not a registered partnership or corporation.

Six months in, Eric ran out of savings before the bar started turning a profit and he got behind on rent. He asked the third partner for money. Instead, the third partner took all the TVs and left.

The waitresses quit because they were paid late. There was no cash for food or beer. And the landlord said that Eric was personally responsible for the five year lease — a debt of $250,000 at least.

After a few more months of barely scraping buy, Eric closes the doors to his dream bar. And the landlord sues.

Although this is a fictional story, I get a call from someone like Eric at least once a month. The details vary, of course. But the story is more or less the same: an erstwhile entrepreneur gets burned by less-than-honest partners or landlords and now has major problems. He’s broke, depressed and ruined.

It’s a really depressing story for an optimistic entrepreneur like me. But sadly, 80% of businesses fail within their first year. And the blow up is usually spectacularly devasting for an owner like Eric.

I am CONVINCED that many businesses would not fail if they had simply started off right. New business owners make a lot of the same mistakes that lead to failure. These include:

  • Not organizing legally, following ALL the steps necessary (e.g. just filing an LLC is not good enough)
  • Failing to keep professional accounting records from Day 1 and getting into tax problems
  • Not having good contracts with business partners and investors (this is one of the biggest mistakes)
  • Getting stuck in a bad commercial lease
  • Not having adequate resources to deal with all the things a new business must do because of lack of planning or education, which destroys cash flow because of constant traps and problems
  • Failing to follow good employment and pay practices from Day 1
  • Underestimating what starting and running a successful business takes

Eric didn’t call me before starting his business. If he had, I would’ve given him my ebook, How to Start A Business… Legally: A Quick and Easy Checklist.

I cannot stress this enough. Getting set up right and under the guidance of someone who has started or help start many businesses will save you thousands of dolalrs and help prevent failure.

Someone like Eric spends $100,000 to open his bar, only to crash and burn in just a few months. Now he’s liable for another $250,000 just with a broken lease…. There are still employee liabilities and taxes to deal with (and that’s if the partners all just disappear). His legal fees with me are going to be a minimum of $50,000. Alternatively, he will bankrupt and lose everything.

In a more perfect universe, Eric would have come to me a year ago. He would have hired me for between $5000 and $18000 and I would’ve helped him set up everything and given him the benefit of my years experience in business start ups.

He would’ve avoided the bad partners, the bad lease, the sexual harassment lawsuit and the waitresses quitting.

He also would have been on track to avoid the plethora of other problems that come from starting a business.

And then his $100,000 investment would not have been such a hopeless risk!

If I practiced law just for money, I would rather have people like Eric pay me $50,000 or more to pick up the broken pieces of their dreams and help them move on.

But I’d rather more small businesses be successful. And the odds of that are much improved when you invest in the foundation when you start up.

Either way, you’ll be calling me.

Whistleblower & False Claims Act Defense Attorneys

WHISTLEBLOWER AND FALSE CLAIMS ACT DEFENSE

The term “whistleblower” is defined as a person who reports illegal activity, fraud against the government, or other wrongdoing within a company, state agency, or organization. A federal law, called the False Claims Act, allows employees and other whistleblowers to bring a qui tam suit in the name of all taxpayers against companies who have overbilled or defrauded the federal government.

A state-level law, called the California False Claims Act, also encourages state employees and other whistleblowers to combat fraud and illegal activity by bringing claims against companies engaged in wrongdoing. If the whistleblower’s accusations are found to have merit by the government, and the company is subsequently charged, the whistleblower will receive statutory rewards for their courage in combating fraud against the government.

bribes 101

At Bellatrix PC, our experienced business lawyers are committed to defending entities accused of engaging in fraud, overbilling, and other wrongful financial and legal acts. Our legal team balances aggressive client advocacy with strict compliance with all pertinent state and federal laws, and is dedicated to assisting businesses of all structures and sizes. We will walk you through the nuances of the allegations against your entity, devise comprehensive defense strategies, and help your business explore its legal options for resolving the situation as rapidly, efficiently, and cost-effectively as possible.

To start discussing your goals in a completely confidential legal consultation, call Bellatrix PC today at (800) 449-8992.

Whistleblower Confidentiality Under California Law

The plaintiffs in whistleblower lawsuits, or qui tam lawsuits, are often referred to as “relators.” The California Whistleblower Protection Act, which protects the identity of relators, also authorizes the California State Auditor to accept complaints from both California employees and members of the general public who wish to confidentially report unlawful and unethical conduct.

Like the identity of the original relator, the confidentiality of these supplemental complaints is closely guarded. With a few special exceptions for law enforcement agencies conducting criminal investigations, complainants’ identities may not be revealed unless the complainant him- or herself grants permission for disclosure.

What Does the False Claims Act Prohibit?

The False Claims Act prohibits numerous types of fraudulent conduct, with some of the more common examples of prohibited acts including but not limited to:

  • A small business supplying false “minority-owned” certification, with the intention of securing additional government contracts, when the purportedly “minority-owned” business is in fact neither owned nor operated by a minority.
  • A healthcare professional billing Medicaid and/or Medicare for medical procedures, such as surgeries or examinations, which were never actually conducted. Medicare fraud is a widespread problem throughout the United States, with the Office of Management and Budget estimating nearly $48 billion in improper Medicare payments in 2010.
  • A government contractor falsely claiming compliance with federal safety regulations, such as those imposed by the Occupational Safety and Health Administratin (OSHA), when the pertinent regulations were in fact disregarded by the contractor.
  • A pharmaceutical company which encourages doctors and other healthcare professionals to prescribe patients drugs for uses which have not been approved by the Food and Drug Administration. This tactic is commonly referred to as “off-label” marketing.

Furthermore, California Labor Code Section 1102.5 provides several additional protections for individual employees. Pursuant to Section 1102.5:

(a) Employers are prohibited from creating, adopting, or enforcing any rules, regulations, or policies which would prevent an employees from whistleblowing, provided the employee in question has “reasonable cause” to believe that the information he or she is providing relates to a violation of state or federal laws or regulations.

(b) Employers are prohibited from retaliating against whistleblower employees. Once again, this provision is contingent upon the employee’s “reasonable cause” in believing that a violation or act of noncompliance has occurred or is occurring.

(c) Similarly to the provision of subdivision (b), employers are also prohibited from retaliating against employees who refuse to participate in illegal, unlawful, and unethical acts which violate state or federal laws or regulations.

(d) Employers may not retaliate against an employee for having exercised his or her rights under subdivision (a), (b), or (c) in any former employment.

(e) A report made by an employee of a government agency to his or her employer is a disclosure of information to a government or law enforcement agency pursuant to subdivisions (a) and (b).

Section 1102.5 is designed to protect California whistleblowers’ legal rights. Employers who violate this statute may be subject to civil penalties, as well as additional damages stemming from lawsuits, couched as retaliation, in violation of public policy or wrongful termination in violation of public policy claims.

Contact Our Business Attorneys

If your company has been charged with committing fraud or other violations of the False Claims Act, the California Whistleblowers Protection Act, or Section 1102.5 of the California Labor Code, it is a serious matter which demands immediate attention from an experienced legal professional.

The employment law attorneys of Bellatrix PC represent entities of all structures and sizes, ranging from small start-ups to large and firmly established corporations, and are prepared to handle even highly complex multi-party litigation cases. Don’t wait until it’s already too late to address your legal issue: call the law offices of Bellatrix PC today at (800) 449-8992.

Business Law

BUSINESS LAW

Disputes, misunderstandings, and litigation impact the health and longevity of your business. Whether you’re the owner of a sole-proprietorship, a partner in a partnership, a member of a limited liability company, or shareholder in a corporation, it is critical to ensure that your entity’s legal and financial interests are being protected by an aggressive and experienced business law lawyer.

At Bellatrix PC, we pride ourselves on providing our clients with responsive, tactical business solutions.  Through critical analysis of the issues at hand, our legal team has repeatedly achieved favorable outcomes for numerous clients across a diverse range of industries and legal structures.  As a results-oriented firm, we aim to resolve complex disputes as rapidly and efficiently as possible, so that you can resume normal operations with clarity and confidence.

To arrange for a private consultation with the commercial attorneys of Bellatrix PC, call our law offices at (800) 449-8992 today.  The sooner you consult with us, the sooner we can get to work addressing your legal matter.

Experienced Business Law Lawyers

Even outwardly simple business transactions can lead to confusion and uncertainty.  Businesses of all structures are subject to myriad state, federal, and municipal regulations, which collectively encompass matters ranging from workplace discrimination to job site safety to the enforceability of non-compete contracts and other contractual agreements.

Even for highly knowledgeable and experienced entrepreneurs, it can be virtually impossible to keep abreast of the business world’s numerous and ever-shifting laws while busy with the daily demands of running a company.  All too many business owners have been unpleasantly surprised by federal investigations, the imposition of civil penalties, and lawsuits by employees, despite believing they were in full compliance with the law.

At Bellatrix PC, we bring a nuanced practical understanding of the full scope of business law to each and every legal matter we handle.  We will listen to your concerns, advise you with regard to your rights and responsibilities as a business owner, and explain the potential outcomes of the courses you could take on the path toward resolving your issue.

Should litigation arise, we are fully prepared to defend your business all the way to trial if necessary.  However, we are also qualified to function as mediators, to represent your company during arbitration, or simply to act as general counsel for your basic, daily questions and concerns.  We will help you understand the benefits and disadvantages of each available legal strategy as it pertains to your matter, so that you can make an informed decision about what’s right for your company.  When you work with Bellatrix PC, you can feel confident that your business is in capable hands.

Representing Partnerships, Corporations, and LLCs: Cases We Handle

As business owners ourselves, we are personally familiar with the seemingly endless complexities which can arise in business and commercial law.  In order to serve our clients effectively, we handle a wide variety of legal matters throughout every stage of the business life cycle, from formation to sale and dissolution.  No matter which point in its life cycle your company has reached, our dedicated attorneys are prepared to counsel you.

We are equipped to handle the full spectrum of commercial matters, including but not limited to the following:

Breach of Contract

  • Contracts act like blueprints, setting clear expectations for all parties to any business agreement.  When a contract is breached by one or more parties’ improper actions or failure to act, the other party or parties can suffer significant financial harm.

Business Formation and Dissolution

  • Selecting the right legal structure is critical for the long-term success of any business.  Likewise, proper dissolution ensures that debts and assets will be distributed appropriately when the company changes hands or reaches the end of its life.

Commercial Litigation

  • All types of disputes can lead to destructive lawsuits.  Whether your company has been accused of breaching a contract, engaging in discriminatory hiring practices, or other alleged misconduct, our attorneys will vigorously defend your business in court.

Contract Drafting and Negotiation

  • Contracts are the foundation upon which all business transactions are built.  We will prepare, review, revise, and aggressively negotiate your contracts with employees and other businesses, ranging from licensing agreements to commercial leases.

Employment Law

  • Whether your company has been named in a gender discrimination lawsuit, needs assistance determining overtime classification and fair payment of wages, or you simply have questions about drafting an employee handbook, our employment law attorneys are here to help.

Trademarks and Intellectual Property

  • Databases, recipes, software, and related information can be a company’s most valuable assets.  We work to protect your intellectual property and trade secrets with clear and enforceable contracts.

Our other areas of practice include, but are not limited to, the following:

  • Business Insurance
  • Creditors’ Rights and Debt Collection
  • Hiring, Firing, and Layoffs
  • Independent Contractors
  • Leasing Property and Equipment
  • Libel, Slander, and Defamation
  • Mergers and Acquisitions
  • Minimum Wage and Wage Disputes
  • Non-Competes and Non-Disclosure Agreements
  • Non-Profit Organizations
  • Payroll, Salary, and Bonuses
  • Permits and Licensing
  • Sexual Harassment
  • Stock Options
  • Tax Compliance
  • Unfair Competition and Unfair Business Practices
  • Whistleblower Lawsuits
  • Workplace Discrimination
  • Wrongful Termination

Whether you’re thinking about starting a company, need assistance resolving a stubborn dispute, or have already been named by a commercial lawsuit, the attorneys of Bellatrix PC have the skill and knowledge to help your business reach its goals.

To schedule a private appointment, call our law offices at (800) 449-8992 today.

What’s Your Problem?

Maybe We Can Help. Request Your Consultation Today.

Alicia Dearn

Alicia I. Dearn is the founder of Bellatrix PC, a woman-owned law firm with offices in Missouri and California. Bellatrix PC handles lawsuits and business transactions. We advise in business, employment, real estate, intellectual property, civil litigation, and election law.


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Disclaimers

The articles published by Bellatrix PC are for informational purposes only and do not constitute legal advice. If you have a legal issue, please get competent advice from a licensed attorney in your jurisdiction. Use of Bellatrix PC's site is subject to our Attorney Advertising Disclaimers.

Election Law Essentials For Third Parties

dollars-and-columns

Money and litigation are weapons used to control election results by the powerful. Third (or minor) party committees, their candidates, and independents are at a significant disadvantage compared to Republicans and Democrats.

I think there are two major reasons for this: (1) lack of resources; (2) barriers to entry created by the powers that be. Sadly, it’s a vicious trap. The laws that were made to create barriers to non Republicans/Democrats rob their third party challengers of resources. And they require resources to overcome.

There is nothing I can do to help third parties overcome lack of money, which is unfortunately a major problem. I can fight the unfair laws to some degree, but those battles require money and are frequently long shots.

But I can create a resource for you. That’s why I wrote a book — coming out July 22, 2015 — just in time for everyone to start gearing up for the 2016 election season. Just Pursuits: How to Run for Office Without Getting Sued, Prosecuted, Audited, Fined, Or Taken Off the Ballot

Just Pursuits book cover

Just Pursuits outlines important legal and practical issues that every third party or independent committee and candidate should consider. Content includes explanations, advice and resources regarding:

  • corporate organization and compliance
  • fundraising an solicitation rules
  • FEC reporting regulations
  • accounting issues
  • regulations governing the interactions between PACs, SuperPACs, parties and candidate committees
  • tax and non-profit issues
  • ballot access
  • regulations on sign placement, cold calls, cold solicitations, election day campaigning, media access
  • debate exclusions

The “major” party candidates have big law firms on retainer. Election law lawyers have all sworn their allegiance to one or the other major parties and do not stray. And so third parties and independents are vulnerable to audits, shut-outs, penalties/fines and lawsuits just because they don’t have the rulebook.

For a limited period of time, I am offering a FREE CD with Bonus Resources for Just Pursuits. Please click on the picture below to get your FREE Just Pursuits Bonus CD by mail. No purchase of the book is required to get the CD. We just ask that you pay $7 S+H to cover our costs. Click the picture or go to JustPursuits.com.

Just Pursuits CD Case

Business Formation Attorneys

BUSINESS FORMATION

Starting your own business is an exciting time full of promise and opportunity.  But before your new start-up can hit the ground running, you must make some very important decisions with regard to business formation.  The structure you select will have a profound effect on issues ranging from the paperwork you must submit, to the degree of liability you will assume, to how many shareholders your company will be permitted.  Creating a solid and organized foundation now will allow your new company to prosper in the future, with the added benefit of reducing your risk of exposure to litigation.

At Bellatrix PC, our knowledgeable and experienced business formation attorneys are prepared to help you address all legal aspects of forming a new entity.  Our legal services range from helping employers ensure compliance with labor laws, to negotiating contracts and transactions on behalf of business owners, to defending companies against lawsuits brought by employees, independent contractors, and clients.  We are committed to empowering new businesses with the legal tools they need to foster growth, minimize costs, and maximize efficiency in daily operations.

To start discussing your goals in a private consultation, call Bellatrix PC at (800) 449-8992 today.  Let’s start talking about how we can help your new company succeed.

Launching a Business Name Tag Sticker New Company Start

Forming a Company: Types of Legal Structures

You have a few options to choose from when it comes to selecting a formal legal structure for your new entity.  No single structure is “superior” to the others: each comes with its own unique set of pros and cons, and a structure that would be completely inappropriate for one organization might be ideal for another.

Our employment attorneys will sit down with you to explain the rights, responsibilities, benefits, and drawbacks associated with each structure, so that you can make an informed decision which serves your best legal and financial interests.  For now, let’s begin by comparing the basic qualities of each structure.

Sole Proprietorships

Once a popular choice, the sole proprietorship has largely fallen out of favor as this structure offers neither separation of funds nor any legal protection against liability to the owner.  Realistically, only the smallest of entrepreneurial pursuits will comfortably operate under a sole proprietorship banner.  If you are planning on expanding your organization to include employees besides yourself, a sole proprietorship is probably not the right option for you.

Partnerships: General Partnerships, LPs, and LLPs

Partnerships can take many forms.  Despite the connotations of the word “partnership,” these structures can actually have more than two partners.

In a general partnership, two or more individuals join together to create a company.  General partnerships neither protect company assets nor shield the owners from liability, which renders them ineffective for many new businesses.

While the federal government and most jurisdictions do not require a formal operating agreement, failure to create a written agreement is akin to tacitly summoning disaster in the event of a partnership dispute.  Ideally, a partnership agreement delineates each partner’s role in the organization’s daily operations, as well as financial rights to company profits.  However, both parties are also bound to third-party agreements made by either party to suppliers, employees, etc. except under some limited and special circumstances.

In a general partnership, all partners share approximately equal involvement in liability and daily operations.  By comparison, a limited partnership, or LP, involves a general partner who has greater involvement at the cost of increased personal liability, and a silent partner who has reduced involvement and liability.  Therefore, unless the general partner is protected under some other formal structure, liability will accrue to the general partner, thereby placing the general partner’s personal assets at stake.

A limited liability partnership, or LLP, is the silent partner partnership.  In an LLP, there are no general partners. Instead, all partners share limited liability for debts incurred by the business.  If your business is being bankrolled by a partner with more collateral than you can personally access, he or she will likely want you to sign a limited liability partnership agreement, or LLP agreement.

Corporations: S-Corps, C-Corps, and LLCs

Corporate variants include S-Corporations, C-Corporations, and the limited liability company or LLC.  These structures enjoy great popularity among many entrepreneurs due to their considerable protections against liability.  Incorporating is only slightly more difficult than setting up a partnership, or applying for the business license and permits you would need to operate a sole proprietorship, but the benefits and the protections are orders of magnitude greater.

Under these types of structures, the business owner is generally not considered personally liable for the actions or debts of the business.  Under normal circumstances assuming the absence of fraud, if the LLC owes a supplier money, the supplier cannot pursue the owner’s personal funds and assets to satisfy the debt.

These structures prove effective and appropriate for many entrepreneurs.  Such a structure might be particularly beneficial if you are thinking about starting separate but related businesses in the future, as the failure of one organization will not “domino” into the others.

Business Formation Requirements

The business formation lawyers at Bellatrix PC will take care of every step of the process on your behalf, including any special requirements which may apply.  We will discuss your immediate needs and long-term goals, educate you on which entities limit personal liability and minimize tax obligations, and advise you regarding which entity type would be best suited for your objectives.

Once we have determined which structure would offer your new company the strongest legal and financial advantages, our legal team will handle all of the following steps:

  • Reserve the company’s name.
  • Obtain an EIN (Employer ID Number) for the company.
  • Draft and file articles of incorporation or organization.
  • Draft the operating agreement and bylaws.
  • Serve as the registered agent for the entity.
  • Draft and review contracts with potential vendors and clients.
  • Negotiate commercial leases and educate you on tenant’s rights and responsibilities.
  • Draft employment agreements, non-disclosure agreements, arbitration agreements, and/or employee handbooks, while ensuring your policies comply with state, federal, and industry regulations.

There are many more steps besides these that you must take to start up a business legally. We have a free guide for you: How to Start A Business… Legally: A Quick and Easy Checklist. Follow the link to get it or call the business law attorneys of Bellatrix PC at (800) 449-8992

Businesses Need Good Contracts

contract signingContracts are the foundation of business. Whether leasing office space, forming a business entity, or ordering product, contracts are essential in defining the rights and responsibilities of every person or company with whom you do any business. Having properly drafted and negotiated contracts means the difference between success and failure as a business. Not only do you need to have the best terms possible, but they need to be understood, written down and enforceable both legally and practically

Human nature is such that even the best relationships need boundaries. Contracts provide parameters to keep things smooth and expectations met. And they spell out responsibilities when relationships break apart.

What types of contracts should you use a lawyer to write?

  • •Purchase or sale of a business
  • Partnership agreements
  • Shareholder agreements (e.g. buy-sell)
  • Commercial real estate leases
  • Real property acquisition agreements
  • Licensing agreements
  • Employment contracts
  • Confidentiality agreements
  • Non-disclosure agreements
  • Non-compete and non-solicit agreements
  • Major vendor supply agreements
  • Customer contracts and master service agreements
  • Website terms of service
  • Equipment acquisitions
  • Installment contracts
  • Assignments, subleases, modification and novations of existing contracts
  • Anything that involves a lot of money, staged or milestone performance, or complex negotiated terms

Here are just a very few examples of why failing to have well-formulated legal contracts can cost you.

Oral Agreements

No matter how long you have known the other party involved in the business deal, and even though oral agreements are permitted and enforceable in theory, they should be avoided. Oral agreements are harder and more costly to litigate because they are he-said-she-said. The best rule of thumb is to always write it down, including modifications and amendments to pre-existing written contracts.

For example, if the contract does not specify everything the parties agreed to, with some precision, there will be a dispute over expectations later. For example, if you hire a contractor to put in a new carpet, you may not be able to prove a breach when he installs green carpet, even if you swear you told him “blue”. Your word against his will not be enough to win the lawsuit and carry the burden of proof.

Using Boiler Plate Templates

While using boiler plate templates might be the easiest way to draft a contract, they may also expose your business to risk. These templates are very generic and do not cater to the specific needs of your business deal. For example, the boiler plate template might state that you waive your right to litigation and must arbitrate any contract disputes, which may not be what your business prefers. You also cannot know the quality of the original drafter or whether the terms are enforceable in your jurisdiction. Computer software and common sense cannot replace an experienced legal practitioner’s judgment.

Quitting A Contract Early Can Cut Off Your Rights

Even if the other party has breached the contract, you must still do everything in your power to uphold your end of the contract — or at least be able to tender performance. If you fail to fulfill your portion of the contract, you may lose your right to seek damages from the breaching party. Of course, you may be excused from performance, too, depending on the breach by the other side. But you need a legal opinion on this before taking measures that could hurt your rights.

This article only barely scratches the surface of what can go wrong with poorly drafted (or oral) contracts. What gremlins do you have in your business documents, just waiting to cause a problem? Consider having your current contracts reviewed for holes and your standard contracts revised. Bellatrix PC offers a Business Risk Review for precisely this kind of preventative work. It can save you a fortune later.