fundamentals of business legal issues grand valley
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Michigan Small Business & Technology Development CenterTM
Counseling ▪ Training ▪ Market Research
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Entrepreneurial SeriesFundamentals of Business Legal Issues
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Objectives
• Introduce the different types of legal entities• Identify how to start a business• Review basic elements of a contract• Develop a collection plan in the event you are not paid• Introduce basic employment issues• Review real property and zoning issues related to business operations• Overview of insurance needs
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Agenda
• Introductions• Business entities• Starting a business• Business and employment issues• Leasing and real property issues
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Introduction
•Welcome to the MI-SBTDC™
Fundamentals of Business Legal Issues
•Instructor•Logistics•Your business •Expectations
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Legal Considerations when Starting a Business
•Who will own the business?•What will be the ownership structure?•Establishing the structure•Forming or acquiring the business•Selecting a name and filing the appropriate licenses and registrations•Location of business and acquiring the location•Employees versus independent contractors
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Legal Identity and Business Entities
•Sole proprietorship•General partnership•Corporation (Subchapter C or Subchapter S)•Limited liability company•Limited partnership•Limited liability partnership
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Comparison of Common Forms of Business Ownership
•Legal form•Protection against personal liability•Basic organizational requirements•Transferability of ownership•Organizational form•Tax consequences for owners•Particular problems.
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Tax Treatment of Business Entities
•C-corp
•S-corp
•LLC
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Legal Structure OptionsRegulation Start-up
cost and registration
Entity & Life
Liability Taxation
Sole Proprietor
Least Regulated
LowCounty
Tied to Individual
Unlimited Individual -Schedule “C”
Partnership
Limited Regulation
LowCounty
Tied to Partners
Partners Liable
SharedSchedule “C”
Limited Liability Company
Limited Regulation
Relatively InexpensiveState
As agreed to by Members
Limited to Assets of company
May choose to be taxed as partnership
Corporation “C” corp “S” corp
(IRS election)
Most regulated
Most ExpensiveState
Perpetual Legal Entity
No Individual Liability
Double taxation
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Form 1040 Schedule C Profit or Loss from Business
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Registering the Business Name
•Sole proprietorship•Register with County Clerk
•Corporation and LLC•Register with Michigan Department of Labor and Economic Growth (Commercial Services & Corporations)
•Importance of filing Certificate of Assumed Name
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How to Enter a Market Business Start Up
•Difficult to obtain financing
•Need for special skills
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How to Enter a Market Purchasing an Existing Business
•Advantages of purchasing an existing business•Disadvantages of purchasing an existing business•Recommended steps in purchasing a business•Keys: - review and analyze financial books & records - stock or asset purchase agreement - why is owner selling?•Purchase checklist
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How to Enter a Market Purchasing a Franchise
•Advantages of starting a franchise•Disadvantages of starting a franchise•Franchise checklist
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Selecting and Using Legal Counsel in your Business
•Questions to ask yourself before interviewing for legal counsel
•Setting up the “interview”
•Suggested interview questions for the prospective attorney
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Contract Basics - Elements of a Contract
•Definition•Written versus verbal contracts•Offer and acceptance•Identification of parties•Effective date•Warranties and representations•Format
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Specific Types of Agreements
•Noncompetition
•Confidentiality
•Employment
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Leases
•Basic terms- Parties to lease- Personal guaranty
•Lease options•Escalations•Tenant/Landlord responsibilities•Basic tip: All leases are negotiable (depends on location, market)
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Collection Action Plan
•Proactive steps•Reactive steps•Get it in writing!
- Attorney fees provision- Interest rate provision
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Construction Liens
•Residential versus commercial projects
•Michigan Construction Lien Act
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Intellectual Property Protection
•Patents
•Trademarks
•Copyright
•Trade secrets
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Employment Issues
•Finding and hiring employees
•Discharging employees
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Independent Contractors
versus Employees
•Independent Contractor / Employer checklist
•Specific differences
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Property
•Environmental issues•Inspection•Renovations•Business entity to hold real property•Location
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Zoning Issues
•Check current zoning of property
•Is the business a home-based business?
•Difficulties in rezoning property
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Insurance
•Life insurance- “Key person”- Shareholder/member to fund buy and sell agreement
•Health•Liability•Malpractice
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The MI-SBTDC™ is funded through a cooperativeagreement with the U.S. Small Business Administration,the Michigan Economic Development CorporationSM
(MEDC) and matching funds from Local Networkpartners in each region.
MI-SBTDCTM State Headquarters
Grand Valley State UniversitySeidman College of BusinessPhone: 616.331.7480www.misbtdc.org
The Michigan SBTDCTM
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Michigan SBTDC Services
• Counseling - One-on-one meetings with experienced business consultants to assist starting or growing small businesses
• Training - Available through the Entrepreneurial Series: ▪ Starting a Business ▪ Writing a Business Plan ▪ Marketing Your Business ▪ Finance ▪ Business Legal Issues
• Research - Provide a full range of information services through the State Headquarters
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Small Business Resources
Additional Local Resources