The slides show how lawyers can help you deal with angry creditors, the IRS, deadbeat customers, greedy spouses, and inadequate capitalization.

1. Effective Use of Lawyers
Speaker:
William A. Price
Attorney at Law
www.growthlaw.com

2. Why Use Counsel?
Business Survival Rates, March 2009:
• 10 years or more: 50%
• 4-9 Years Old: 24%
• Less than 4 years old: 27%
Source: Bureau of Labor Statistics

3. What Kills Businesses?
• Angry Creditors
• Disgruntled And Greedy Spouses
• IRS and State Tax Collection Actions
• Employee and Customer Lawsuits
• Inadequate Capitalization

4. What Can Lawyers Do To Help?
Angry Creditors:
1. Write contracts that give you time to pay,
and time to fix payment and quality
problems
2. Set up payment arrangements that give you
timely cash flow
3. Use debtor’s rights, or BK protections

5. Angry Wives
• Negotiate a Buy-Sell clause for
every business deal, so you can
leave if your partner’s wives get
greedy (Hagshenaes v. Gaylord)
• Try a prenuptual agreement, or at
least a divorce or separation
agreement that won’t kill the
business

6. IRS And State Tax
Collection
The IRS Or State Can Levy (Seize)
• Your property
• Bank Accounts Or Other Third Party
Held Assets
• Very Few Limits On Type or
Amounts of Levy And Sale
• You Pay Penalties, Interest, and Tax
Due

7. What NOT To Do
• Try to hide assets (overseas banks, socks
under mattress)
• Fail to answer IRS or state tax notices within
30 days
• Fail to pay taxes on time
• Fail to negotiate for time and penalties waiver

8. What Can Lawyers Do To Help?
1. Help You Document That No Tax Is Due
2. Present an Offer In Compromise, To Settle
Tax Debts
3. Negotiate Time To Pay, with proof of
personal hardship or business cash flow
issues (IRS comes back after a year)
4. Bankruptcy filings, only if necessary

9. Litigation Risks
• Your Partners and Shareholders:
Fraud and Fiduciary Duty and
Greed and Incompetence
• Your Employees: EEO, UI, ADA, etc.
• Your Suppliers: Late payments, bad
credit reports, bank account freeze
• Your Customers: P/L, Warranty,
Nonpayment Risks

10. What Can Lawyers Do To Help?
1. Partners/Investors: Pre-investment disclosures,
ongoing partner/investor accounting and reporting
of all material facts, Buy-Sell Agreements
2. Employees: Good HR Documents, Response to
Complaints, Discipline Supervisors If Problems, Not
Just Staff
3. Suppliers: Pay them on time: Loans for cash flow
can help
4. Customers: Testing before sale, Respond if
Problems, Consider Mandatory Arbitration Clauses

11. Inadequate Capitalization
1. Don’t confuse revenue with
profits
2. Expenses Come Before Income
3. Lack of Cash Flow, Not Lack of
Net Worth, Is What Kills You
4. If You Don’t Meet Payroll, Your
People Will Quit

12. Avoid Cash Flow Death
• Payment Terms: Get paid upfront,
or as soon as possible and
document this in your contracts
• Factors: A/R 95% available, P/O
75%, 1.5% per month interest
• Lenders: SBA Rates 2% over prime
• Capital Sources: Friends and
Family, Partners, Angel Capital, VC

13. What Can Lawyers Do To Help?
1. Payment Terms: Negotiate industry standard and
« help us get started » terms from customers and
suppliers (Get paid early or net 10, pay within 60
days, not COD.)
2. Factors: Use your customer’s credit, then large cash
sources will be available
3. Bank Loans: Introduction and negotiation, many of
21 SBA and other small business lenders in Illinois
4. Access To Capital: Learn the meaning of
terms, prepare disclosure documents, approach all
sources

14. Any Questions?
William A. Price, Attorney at Law
Tel/Fax 1-800-630-4780
Email: wprice@growthlaw.com
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