Archive for November, 2010
The Bluff County Reader recently published a great article about my law office and the historic restoration. See the entire article here at the Bluff County Reader website.
Smart banks ask their business customers for a personal guarantee before they give a loan to a business. It makes good business sense for banks to do so–even if the business fails, the owners have agreed to cover the debt out of their own pocket. Nowadays, you probably won’t find many banks offering small businesses loans without a personal guarantee of some sort.
This can pose risks to the business owner, however. If the business fails, your personal assets could be at risk.
It’s even riskier if you have left the business for which you guaranteed the loan in the first place. Small business owners sometimes disagree with one another and agree to go their separate ways. The bank, however, won’t care that you’ve left the business if your former company decides to default on its loan obligations.
Before you make it official and withdraw from the ownership of a company, consider the loan obligations and whether you’ve made any personal guarantees. If you have, don’t withdraw until you’ve made sure that you are no longer legally obligated to pay for the company’s debts. That may mean the business has to negotiate your removal with the bank or refinance its loan without you as a guarantor. But you should insist your business partners make that happen, because otherwise you’ll be in the tough position of being liable for a debt over which you have no other control.
Think about it. If you withdraw from governance of the company, you can no longer negotiate a sale of the assets if the company suddenly runs out of funds. Instead, you’ll be stuck guaranteeing a loan for a company that doesn’t care for your opinion anymore on whether it should continue to pay its obligation.
Before you withdraw from ownership, membership, or governance of a small business with debt obligations, consider consulting a lawyer to advise you on the possible ramifications of your withdrawal.
In small towns, we’re used to taking care of business the old-fashioned way–with a handshake and common sense. Banks let us cash checks that our neighbor forgot to sign, because everyone knows that the neighbor often forgets and the teller recognizes his handwriting on the rest of the check. A construction company doesn’t use contracts, because his word is just as good. The grocery store may even let you “charge” groceries with nothing more than a nod of the head. The cashier will staple the receipt to a piece of paper with your name on it after you leave and send you a bill at the end of the month.
So it comes as a surprise when a bank won’t let you complete a transaction. Or a company won’t take you at your word.
It’s even harder when you are no longer able to speak for yourself. Imagine a person who has become disabled. While he can still make decisions and have opinions, he can no longer get on the phone and navigate through the customer-service menu for hours while trying to make changes to his account. If his wife calls, the agent will ask to speak to the account holder. And what if the account holder can no longer speak? The agent will refuse to share information with his wife.
A power of attorney is an easy way to plan in advance so that your family can prevent such maddening obstacles to taking care of business. You can grant the power of attorney to one or more people, designating whether they can act individually or must agree to act on your behalf. You can revoke the power at any time. You can specify that the power continues even if you become unable to make decisions for yourself. And if you’re worried that the person holding the power will take your assets for himself, you can even prohibit self-dealing.
Yes, it’s awful to think about a time when you might no longer be able to take care of your own business. But I urge you to consider this planning a gift to your family that will ease their administrative burden if they’re ever trying to help you when you can’t help yourself.
Please contact my law office for more Minnesota-based information about how you can protect yourself, your family, and your assets through wills, trusts, powers of attorney, and estate planning.
We’ve scheduled a grand opening for my law office. Join us on Saturday, November 20, 2010 from 3:00 to 7:00 pm. It will be an open house event with food and drinks.
We’ve been remodeling our historic building for a year now, and I know people are interested to see what we’ve done. I hope you’ll join us for food, fun, fellowship, and tours. And you can find out how my law office could be useful to you as well. See you there!