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.

Cover Your Assets

win at the end of red carpetHow is this going to end for you?

I remember the first time someone asked me that question. I had no idea what they were talking about.

That “someone” was a successful entrepreneur. His words still echo in my mind. He said, “Unless you create a business with assets, you do not have anything you can sell when you want to exit.  This means you have created a job for yourself and nothing more.”

I had not really thought about that before. As a service-based business, my income is based on work I complete for clients at any given moment. As lawyers, we talk about “books of business,” but it’s a silly concept because a client yesterday isn’t a guaranteed client for tomorrow. But I don’t want to work long days for the rest of my life, so I started thinking about asset accumulation and asset protection.

That’s why I’ve created and protected intellectual property in my law firm. I’m also executing a strategy to acquire other assets (mostly real estate) that will appreciate in value over the years. This way, when I’m ready to exit, I have significant assets to add to the value of my client relationships.

Your business is no different.

In addition to the client relationships you build, your business has physical assets and intellectual property. Things like:

  • The name of your business
  • The name of any process or system you use to service your clients
  • Trade secrets (like a formula or a recipe)
  • Long term lease agreements
  • Customer contracts and purchase agreements
  • Accounts receivable
  • Books, manuals, marketing materials and blogs that you write
  • Your website
  • Your equipment, furniture, cars and computers
  • And much more….

All of these assets have value…as long as you protect them.

Most business owners forget about the second part – protecting assets for the long term and maximizing their value when you are ready to sell.

You need to protect your business assets from someone looking to do you harm.

One of the ways to do this is to create a legal structure that insulates valuable assets from dangerous ones.

For example:

If you have a fleet of trucks that delivers your goods, you may want to own the trucks in a transportation company that is separate from your main business.

Or

When you own multiple properties, you might want to set up the ownership of each property in a separate company, with different operating agreements, and ownership structure.

Or

You may want to create a special type of trust that owns your intellectual property and licenses it back to your business.

These are just a few examples and not right for every business. There are many legal structures a business owner can use to help make sure his most valuable assets are insulated from potential threats. The key is setting up a structure that will grow with your business, keep taxes down, and allow for ultimate flexibility when you are ready to exit.

It doesn’t matter where you are in the business lifecycle; it is never too early or too late to begin thinking about asset protection. The best time to plan your asset protection strategy was when you started your business.  The second best time to plan it is RIGHT NOW.

One of the ways I can help you right now is with a free business planning session, or you can contact one of our business law, employment law or real estate law attorneys today.

Layoffs and Reduction in Workforce

LAYOFFS AND REDUCTION IN WORKFORCE (RIFs)

Reducing your workforce is never an easy decision. Many employers will do everything they can to cut costs, increase sales, secure loans, etc., in order to keep their workforce fully intact. However, sometimes these adjustments are simply not enough and a reduction in workforce, otherwise known as a layoff, becomes necessary.

Office staff

Before notifying the affected employees of the reduction in force, it is very important to make sure that your business is legally protected. There are a number of laws and acts that protect employees, not employers, in reduction-in-force or layoff situations. It is critically important to keep these regulations in mind when determining how you execute a reduction in force, which employees to include in the reduction, and how to structure severance agreements if you choose to offer them.

Don’t rush your business into a legally and financially disadvantageous situation. Before you commit to a potentially disastrous restructuring of your workforce, contact the experienced employment law attorneys of Bellatrix PC for assistance. We will help your company safeguard its interests, advise you through each stage of the legal process, and most importantly, keep you compliant with state and federal laws. To arrange for a private consultation, call our law offices today at (800) 449-8992.

Does the WARN Act Apply to Your Business?

The main objective of the WARN Act, or the Worker Adjustment and Retraining Notification Act, is to ensure that employees have sufficient time to prepare for the transition between jobs. The WARN Act generally applies to private for-profit businesses and private non-profit organizations, as well as quasi-public entities separate from the government, which employ:

  • A minimum of 100 full-time employees, excluding employees with fewer than six months on the job, as well as employees who work under 20 hours per week.
  • A minimum of 100 employees who collectively work a combined minimum of 4,000 hours per week.

Under the WARN Act, employers are generally required to provide the affected employees with 60 days’ advance notice, which must contain specific information, of the following:

  • The temporary or permanent closing of an employment site where a business intends to lay off 50+ full-time employees.
  • A mass layoff, where there will be at least 50-499 employees laid off at a single employment site and that number of laid off employees will be a 33% reduction in workforce at that employment site.
  • Any reduction in workforce of 500+ employees at a single employment site.

If adequate notice is not given, the employer could be liable for back pay and benefits for the time period of the violation, up to 60 days, which can be reduced by any wages the employer pays over the notice period. Employers can also be subject to civil penalties and paying an opposing party’s attorneys’ fees for WARN Act violations.

There are certain exceptions to providing WARN Act notice, including if a natural disaster is behind the plant closing or layoff, if the business could not have reasonably foreseen within 60 days the events leading to the layoff or closing, and when a business is actively seeking capital to try to avoid layoffs.

Avoiding Employment Discrimination Lawsuits

In California, employers are not permitted to layoff an employee solely based on sex, gender, age, national origin, religion, or sexual orientation. When a reduction in force impacts or targets employees in one of these protected classes, it can lead to claims of discrimination. The most common of these claims are made for age discrimination, when an employee states that he or she was eliminated because of the expense of their continued employment to their employer.

When planning for a reduction in force, employers should analyze their workforce to determine what it looked like before and what it will look like after making the reduction decisions. For example, if the employer statistically had 40% minorities before the reduction and 5% after, the employer needs to have a legitimate business rationale for this result that will withstand a charge of discrimination, if one is made. The employer may want to rethink their method of restructuring in a situation such as this one.

The Older Workers Benefit Protection Act (OWBPA)

The Older Workers Benefit Protection Act (OWBPA) is an amendment to the Age Discrimination in Employment Act (ADEA) directed at protecting the benefits of workers over the age of 40. Generally, whenever employers seek a release from federal age discrimination claims, such as in severance packages or settlement agreements, employers must comply with the OWBPA.

The requirements of the OWBPA are generally triggered in the four following release scenarios:

  • An employee is involuntarily terminated, but does not bring a lawsuit or file a complaint with the Equal Employment Opportunity Commission (EEOC).
  • A release by an employee who was involuntarily terminated in a mass layoff or group workforce reduction, but does not file a lawsuit or complaint alleging age discrimination.
  • A release in the settlement of a disputed claim, including lawsuits and EEOC claims.
  • A release by an employee who voluntarily quit the job as part of an incentive program.

Regardless of the originating scenario, when the OWBPA is triggered, the Act requires that releases be drafted in plain language contain certain provisions, including a written advisory for the worker to consult with an attorney prior to signing the release, state a specified period for the worker to review the release (21 or 45 days, depending on the circumstances), and provide for a seven-day period to revoke the release after signing. If a release is not in compliance with the OWBPA, it can be invalidated, so it is important to ensure that you comply with this Act.

Union Contracts and ERISA Compliance

Employers planning to lay off union workers should review the collective bargaining agreement (“CBA”), as it defines employee rights and ensures that they are not violating provisions of the CBA. Certain parts of the agreement may need to be renegotiated with the union, or you may have to adjust your method of laying off union workers.

Employers should also be aware that some severance and voluntary incentive pay plans may be plans covered by the Employee Retirement Income Security Act, commonly known as ERISA. This act generally establishes minimum standards for pension plans in private industry and gives extensive rules in the area of employee benefit plans.

All members of your management team that are given the responsibility of notifying employees of the reduction in force should be educated to ensure consistency. Your management team should know exactly what procedures to follow in conducting exit interviews, what statements should or should not be made, and how to answer employee questions.

Your team should also conduct the process as quickly as business conditions permit to maintain acceptable productivity levels and employee morale. Human resource administration should continue as normally as possible, administering performance reviews and counseling notices. Do not use selection for layoff as a substitute for incomplete performance management.

If your business is considering a reduction in force, or layoff, receiving advice from an employment attorney is recommended. Bellatrix PC can help ensure that your reduction in force is executed in compliance with all of state and federal laws. We can also help draft or review severance agreements for affected employees.

To arrange for a confidential legal consultation with the experienced business attorneys of Bellatrix PC, call us today at (800) 449-8992. We have offices in San Diego, St. Louis, and Riverside, CA.

Liquor License Attorneys

LIQUOR LICENSES

No matter the company’s location, a liquor license is an incredibly valuable asset to possess.  These licenses are often very difficult to obtain, and the Twenty-first Amendment to the US Constitution has done nothing to abate demand.

This high demand for a license doesn’t bode well for the owner who plays fast and loose with the regulations.  State liquor authorities are seldom forgiving.  The business owner who won’t play by the rules is easily replaced by someone who is dying to demonstrate his ability to comply.  Violating a regulation, even in an innocent way, can place a business owner on the fast track to an appearance before the liquor licensing authority — or even worse, total revocation.

Restaurants, nightclubs and other businesses that rely on the ability to serve liquor need to ensure staff is well trained, and mindful of the gravity of the situation.  Business owners need to be educated about compliance, and often need guidance instituting policies which ensure compliance is strictly adhered to.  If your entity needs assistance with a legal matter pertaining to licensing, call the experienced business lawyers of Bellatrix PC at (800) 449-8992 today.

whiskey in tumbler on ice

Put Our Business Attorneys to Work For You

Regardless of the type of company you operate — winery, distiller, host, caterer, liquor store, distributor, restaurant or tavern — you will benefit from a business risk review of your employment practices and policies.

If you are contemplating opening a business or want to apply for a liquor license, or if you are currently operating a company which has been accused of a license violation, Bellatrix PC can help.

We handle a variety of liquor licensing related matters, including:

  • Completing and filing the paperwork for a license, including later hours of operation, single sales, live and amplified entertainment, dancing, video games, and pool tables.
  • Buying or selling your license.
  • Appealing license denials.
  • Appearing at hearings or proceedings related to violation claims.
  • Updating any pertinent information that may affect your license, such as changes in your Articles of Incorporation, stock updates, LLC operating agreement changes, or any Secretary of State alterations.

Our knowledge legal team is also available to educate your company management on ways to avoid revocation, so that you can keep your daily operations as smooth and efficient as possible going into the future.

Operations after Obtaining a Liquor License

You already have a license — but do you know which regulations govern your ability to serve liquor offsite? Does your license allow you to serve liquor at a catered event?

This is a very complex area of law, and even after license acquisition there are many areas in which employers will need legal guidance.  For example, one area business owners tend to overlook is updating the Articles of Incorporation or other operating agreement to reflect the acquisition of the license and the subsequent operational changes that will necessarily follow.

A revocation may occur for any number of reasons, including but not limited to the following common scenarios:

  • Serving alcohol to minors or police decoys.
  • Serving alcohol outside of the authorized hours of operation.
  • Possession of alcohol outside of business premises.

It is important for employers to remember that obtaining the license is only half the battle: maintaining strict compliance with all relevant state and federal laws is critical to long-term legal and financial success.

Contact Our Lawyers for a Legal Consultation

If your entity has been accused of committing a violation, our dedicated and experienced liquor license attorneys will work with you to investigate the incident and formulate a strong defense strategy.  We will make every effort to settle the matter outside the courtroom, but should litigation become necessary, we are prepared to aggressively fight to protect your best interests.

To schedule a private legal consultation, call the law offices of Bellatrix PC at (800) 449-8992.  Our offices are located in St. Louis, San Diego, and Riverside, CA.

Commercial Real Estate Transactions

COMMERCIAL REAL ESTATE TRANSACTIONS

Commercial real estate transactions can be particularly complex and high-stakes transactions where millions of dollars may be at stake. Whether you are buying, selling or conveying property your transaction should be thoroughly reviewed prior to its execution. Taking the time now to perform a meticulous legal review by an experience Bellatrix PC attorney can reduce the likelihood of a dispute or costly litigation further down the line. As Your Peace of Mind Advocates we can guide your business through both relatively straight-forward and complex real estate transactions while protecting your company by performing due diligence and a thorough review.

Contract Form

Attorneys handle commercial real estate transactions

Our commercial real estate practice is designed to meet the needs of business and companies dealing in commercial real estate regardless if they are a buyer, seller or landlord. Some of the services we can provide regarding commercial real estate transactions include:

  • Drafting commercial real estate contracts – Our attorneys can draft real estate contracts for purchasers and sellers. Our contracts address and contemplate the unique needs and considerations present in every transaction.
  • Thorough review of real estate contracts — We will review your contract thoroughly and meticulously. Our goal is to protect you from contractual provisions that you neither bargained for nor expected. We can explain the terms and language utilized so that you can fully understand the benefits and obligations of the contract.
  • Commercial real estate due diligence – Prior to executing your real estate transaction we can perform a title search to check for the existence of liens, easements and encumbrances that can affect your title.
  • Attend real estate closings – We can represent you at a real estate closing or settlement to address any last moment concerns.
  • Real estate litigation – unfortunately despite the best efforts of all involved sometimes transactions do not pan out and end up in disagreement and conflict. We can advocate for your business’ position professionally and aggressively.

The foregoing is merely a brief synopsis of the services our legal team can perform regarding your potential commercial real estate transaction. Our attorneys can provide a clear and thorough view of the transaction and its effects.

Regulatory compliance, zoning, and other concerns can be handled by Bellatrix PC

When you secure a piece of land it is often for a particular purpose whether that purpose is to run a business, make an investment, or another goal. If you are a buyer, it is essential that real estate that you will be able to use the real estate for your intended purpose. Failure to perform diligence regarding land use regulations can result in obtaining property that cannot be used or the necessity of further legal action; in any case, neither situation would be ideal. Similarly as a seller, you may offer a warranty or assurance regarding the property you are transferring. You should ensure that what you have promised is what the buyer will receive or you are likely to find yourself litigating the matter in the future.

Reassurance and peace of mind in your commercial real estate dealings

As Your Peace of Mind Advocates the attorneys of Bellatrix PC are dedicated to guiding you or your company through commercial real estate transactions. We offer an array of legal services packages to meet the varying needs of businesses. To schedule your free & confidential legal consultation, call (800) 889-8376 or contact our firm online.

Commercial Litigation

COMMERCIAL LITIGATION

Business litigation is a complex area of law often made even more complicated by complex chains of events and factual scenarios. Given this, business law can be difficult to nearly impossible to fully master, understand, and manage on your own.  At Bellatrix PC, we represent and act as your Peace of Mind Advocates. Our commercial practice is structured so as to be responsive not only to the needs of large corporations, but also emerging start-ups and businesses everywhere in between in a vast array of industries.

Stand out from the crowd

Our legal team will listen to your concerns first prior to utilizing their years of experience and legal knowledge to help protect your interests. Whether you case is relatively straight-forward or a complex commercial matter, we will remain committed to aggressively pursuing legal solutions that are a fit for your business and its circumstances.

We work hand-in-hand with your existing business structure

Our legal team at Bellatrix PC is focused on providing the type of services that one would ordinary only expect from in-house counsel. We can recommend viable means for your management team to interface with our lawyers. When you work with Bellatrix PC you can always expect:

  • Steady legal guidance – In an uncertain and changing world, Bellatrix PC can be your business’ guiding legal star. A Bellatrix attorney can always handle your day-to-day legal concerns.
  • Clear communication – Our attorneys are dedicated to developing a strong relationship with each of our clients. We are dedicated to providing answers to your legal questions in a timely manner. If we are unable to take a call, we always strive to return in as quickly as possible.
  • Value for your legal dollar – A difficult economic climate has caused companies to cut-back and restructure their operations. Our firm is mindful of these economic pressures and the need to justify expenses. Therefore we always strive to provide real value for your legal expenditures.

Our attorneys are dedicated to fighting for your business. As an entrepreneurial business itself, Bellatrix PC empathizes and understands the current concerns and barriers growing businesses face in today’s economical climate. It is our deep personal desire for excellence that drives us to provide the most cost-efficient and in-depth legal services to each business we represent.

Providing Peace of Mind in Litigation

We understand that litigating a matter is rarely the preferred choice for any company.  Litigation can be expensive and time consuming. Therefore, we always explore all options that are likely to result in a favorable outcome for our clients whether by formal settlement, mediation or arbitration. However a settlement or form of alternative dispute resolution (ADR) is not always an appropriate or favorable means of resolving a dispute. In light of this reality, our attorneys always prepare thoroughly with the prospect or a trial in their mind. We handle a broad array of commercial litigation areas not limited to:

  • Breach of contract
  • Business succession
  • Business torts
  • Class action lawsuits
  • Closely held business planning disputes
  • Corporate takeovers
  • Corporate acquisitions
  • Corporate mergers
  • Contract disputes
  • Consumer fraud claims
  • Employment disputes
  • Insurance defense
  • Professional malpractice
  • Shareholder Actions

At Bellatrix PC, we assist our clients in navigating today’s legal challenges and regulatory compliance. At Bellatrix PC, we pride ourselves in our dedication and professionalism in all of our legal endeavors. To schedule your company’s free and confidential consultation with a Bellatrix PC commercial litigation attorney call (800) 449-8992 or contact our firm online.