How to Avoid the Nightmare of Giving Up Business Ownership

Business Attorney in Los AngelesContinuing from our last post, Pitfalls of Giving Up Equity in a Business Venture, Ownership of your business is key. It is the symbol of your own hard work and passion, and security for the success of your future decisions. The more ownership you give up, the more you assume the responsibilities to other parties who can hold up your progress, especially if they have selfish or malicious intentions.

Don’t make life more complicated. It at all possible, avoid giving away ownership. To help you in this key strategy, here are some basic tips:

  1. Work with you attorney to develop a rock solid Buy-Sell Agreement that protects your interests and decision making capabilities.
  2. Include stock option plans, profit participation programs, bonuses, and incentive-based programs to mitigate equity grants.
  3. Evaluate key man insurance, disability policies, and other strategies that emphasize employee benefits without giving away ownership.

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Pitfalls of Giving Up Equity in a Business Venture (Part 1)

Pitfalls of Giving Up Equity in a Business VentureFrom entrepreneurs to trusted advisors, financing a new business venture can be extraordinarily challenging. When you are considering your options, however, be very cautious about giving up ownership. Such a strategy can help get your business started in the short run, but it also can be a complete headache in the long run.

An Ounce Now, A Pound Later…

  • Imagine that you are an entrepreneur with a great idea and superb business model, but no start-up capital, or at least not enough to take flight with your business. You go to your parents, spouse, brothers, sisters, friends, and your spouse’s brothers, sisters, and friends (you get the picture).
  • They spare you some change, and in return, you offer them something as a symbol of your gratitude, something that will pay huge dividends later when your idea takes off and the big-money suitors come knocking: ownership in your business
  • A few years later, guess what? Congratulations! A large publicly traded company wants to acquire your business. Your hard work has paid off. Your potential acquirer wants to write you a check for several million dollars. All you have to do is cross your “t”s and dot your “i”s and the deal is done. In order to do so, however, your attorney tells you to have a meeting, take a vote, and make sure all of the other owners are on board.

Uh-Oh, I Didn’t Forsee This…

From the initial start-up capital to the equity you granted key employees, your business now has 10 other co-owners, all of whom are entitled to vote on the proposal. By the way, as part of the acquisition, the acquirer wants to move your operations to Ohio. Plus, in the years since you started the business, you and your spouse went through a messy divorce, but your ex-father-in-law and ex-brother-in-law are still owners. (Trust us; we’ve seen this and much worse …)

With all of these variables, do you think getting a consensus vote from all the co-owners will be easy? Not a chance! Some people are not so keen on the idea of moving to Ohio. Others (your ex-in-laws) see the dollar signs and know that they can make life very difficult for you if they refuse to go along with the acquisition.

What’s the Solution?

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New Name, Same Dedication…

Hymes, Schreiber & Knox, LLP

We have changed the name of our firm from Anker, Hymes & Schreiber, LLP to Hymes, Schreiber & Knox, LLP. The name change comes after the passing of Samuel H. Anker and the promotion to partner of our long-time firm member, KC Marie Knox.

KC Marie Knox received her Juris Doctorate from the University of San Diego School of Law and, after several years of practice, began working with our firm in 2007. KC has been an integral part of the firm, focusing her practice on estate and business planning, probate, trust administration and estate litigation. KC brings a depth of experience to our firm and its clients.

KC has had her articles on “Digital Assets” published in the San Fernando Valley Lawyer Magazine and has been a presenter for the National Business Institute, speaking on issues related to elder law. She volunteers as a settlement officer with the Probate Settlement Panel at the Los Angeles Superior Court. In addition to her work as an attorney, she is an adjunct law professor at Abraham Lincoln University School of Law teaching courses in Wills, Trusts & Estates as well as Community Property since 2011. KC, along with her husband and two children, have close connections with the San Fernando Valley where they work, volunteer, and go to school. KC volunteers as a Board of Trustees Member for Northridge United Methodist Church and as a Girl Scout Leader.

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Make Sure Your Agreements Are in Writing

Real Estate Attorney in Woodland HillsA recent California Court of Appeals decision once again demonstrated how important it is to always get your agreements in writing.  While the decision was in the context of a real estate broker’s claim for a commission, the basic principle can be applied to all agreements.

In its decision which was issued on December 1, 2016, the California Court of Appeal reiterated the long-standing rule in California that a real estate broker’s claim for commission is not enforceable unless the agreement to pay that commission is in writing.  In the case that was before the Court,  the buyers told their broker friend that they were looking for a home.  Being a good friend, he agreed to assist and represent them in their search for which he was to be paid a commission.  Being “friends”, they did not bother to put that agreement in writing.  The broker found a home for the Buyers and made two offers on  their behalf.  The Seller made counteroffers, at which point the Buyers then asked their attorney, also a broker, to assist them.  Their attorney then made an offer on their behalf for the same property, which was accepted.  When his claim for a commission was rejected, the original broker sued for his $925,000.00 commission. (more…)

What To Do If You Don’t Want To Be Kept On Ice Indefinitely

Business Attorney Woodland Hills IceFran the funeral home director called the other day. Our office had been providing ongoing legal services related to her business structure. She knew that, in addition to other services our law firm provides, one of the areas we specialize in was “dealing with the dead”.

Her problem was a unique one to most, but perhaps not something that uncommon in her industry. Her question-I have a family “feuding” over what to do with their recently deceased husband/son’s body-and she was now in the middle.

A couple of months before John had died, and while he was very ill, his wife had contacted the funeral home to pre-arrange for services and cremation. When John died his body was delivered to the funeral home to proceed with those arrangements. Shortly after the body arrived, Fran was contacted by John’s nephew who explained that due to religious reasons the body should not be cremated or disposed of in the pre-arranged manner. The wife did not agree. In the meantime, Fran had a body “on ice” at her business for who knows how long

The question: Who had the right to control the disposition of John’s remains?

John did not have did not have a Durable Power of Attorney for Health Care which would have allowed him to designate who he wanted to be responsible for the disposition of his remains. Because he did not have that document, the person who had the right to control the disposition of his remains is determined by California law.

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Caring for your Companion and The Importance of Protecting Your Pet

(*Interview with Attorney KC Marie Knox starts at 9min:50sec)

Estate Planning Attorney KC Marie Knox was invited to “Love That Dog Hollywood” to speak about the importance of protecting your pet and planning in the event of a tragedy.

Our law firm has always been ahead of the curve in terms of coming up with different aspects of your estate that you should be protecting and planning for if you were to become disabled or pass on. (more…)

Elder Law and Medicaid Planning: Everything You Need to Know

Estate Planning Attorney Los AngelesAttorney KC Marie Knox of Law Firm Anker, Hymes & Schreiber, LLP will be teaching a 2-day Practical Course hosted by the National Business Institute (NBI) on the subject of Elder Law and Medicaid Planning. KC Marie Knox is a Los Angeles Estate Planning Attorney who has been practicing law for over 10 years.

Don’t miss this opportunity!

  • 2 full days of elder care planning tips and trust drafting knowledge

  • Detailed procedures for pursuing a Medicaid case from start to finish

  • Leave fully prepared to represent elderly clients

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Walking Away Equally Unhappy

Event: ProVisors Panel on Negotiation
Venue: Calabasas Country Club
Location: Calabasas, Los Angeles, Ca
Speaker: Attorney Douglas Schreiber of Anker, Hymes & Schreiber, LLP

Transcription:

There is something that I constantly heard over and over again from judges when you would be at a settlement conference. Every judge would give the lecture and I’m sure every lawyer who is in this room has been in front of a judge at some kind of settlement conference has heard it: (more…)

Business Disputes and Succession Planning

Event: ProVisors Panel on Negotiation
Venue: Calabasas Country Club
Location: Calabasas, Los Angeles, Ca
Speaker: Attorney Douglas Schreiber of Anker, Hymes & Schreiber, LLP

Transcription:

I come into the negotiation process typically in a slightly different situation. Mark is looking to build a relationship. By the time I usually get involved, I’m looking to get rid of a relationship, quite honestly:
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What To Do in a Heated Negotiation

Event: ProVisors Panel on Negotiation
Venue: Calabasas Country Club
Location: Calabasas, Los Angeles, Ca
Speaker: Attorney Douglas Schreiber of Anker, Hymes & Schreiber, LLP

Business Attorney Doug Schreiber of Anker, Hymes and Schreiber, LLP answers the question of what to do when things get heated in a negotiation.

Transcription:

Mediator: What do you do in a contentious situation? This sounds like everybody’s having a great time and you can figure out must haves, and you can walk away. What do you when it’s contentious?

Attorney Doug Schreiber: That happens a lot. You try to backup and find some form of agreement.   If it’s a situation where you are arguing over an amount of money, maybe you back away from the amount and talk potential about terms. (more…)