Growing Your Business
Small business is the driving force behind today’s recovering economy. Due in no small part to the recent economic decline, the number of small businesses has grown substantially overrecent years. Indeed, the number of small businesses providing business services more than doubled between 2007 and 2010 from 2.97 million to 6.03 million. Despite both growth in the number of small businesses and the small business industry in aggregate, these businesses continue to face significant challenges from the fallout of the recession and the failure rate for small businesses increased by more than 40% between 2007 and 2010. Many small businesses simply cannot affordthe legal and professional services necessary to navigate the difficulties posed by the currentbusiness environment.
Starting and Growing your Business Sponsored By About the Sponsors The Young Lawyers Section (YLS) The Young Lawyers Section (YLS), founded in 1971, was created to address the needs and interests of newly admitted attorneys. To satisfy these needs the YLS offers substantive practice committees as well as public service committees and projects. The diversity of committees and projects affords a wide variety of ways for attorneys to participate in the YLS. What began as a small group of fifty young lawyers hosting continuing legal education programs covering a handful of substantive law areas has grown into a dynamic and diverse group of more than 9,000 lawyers and law student members. The YLS offers over 30 substantive committees and annually implements over 50 member and public service projects in addition to seminars and networking events. Whether you are law student or young attorney, the YLS is a valuable resource for your personal and professional development. Consider attending a committee meeting or seminar, a social or volunteer with a member or public service project to enhance your career and professional network. Small Business Advocay Council The SBAC was formed by a group of business owners and professionals who became convinced that the only way to be heard was to organize and pool their resources together. The SBAC is a powerful and cohesive advocacy group that: � Promotes/supports leaders that prioritize the needs of council members and understand the urgent issues facing small businesses. � Supports legislation and governmental action favorable to small businesses. � Supports our members through referrals providing the public with incentives for doing business with their local members keeping money and jobs in our local communities. � � Counts 450 businesses since its inception in March 2010. Find us online at www.sbacil.org � 2012 The Chicago Bar Association | Young Lawyers Section | SBAC Designed by Gasman Design, Inc. � www.gasmandesign.com Contents Preface Chapter 1: Business Plans Michael Bromiley and Mark Zanders, Gentry Venture Partners Pages 3 4-5 6-7 8-9 10-11 12-15 16-17 18-19 20-21 22-23 26-27 28-29 Chapter 2: Office Space Mike Lombardo. Blue Star Properties Chapter 3: Serviced and Virtual Office Solutions Angela Doemel, ServCorp Executive Suites and Virtual Offices Chapter 4: Business to Business Equipment Lease Financing Anthony Roscoe, Equity Building Financial Chapter 5: Legal Structures for Business Sean L. Robertson, Robertson Law Group, LLC Chapter 6: Registering Your Business Trenton Bavaro, Corporate Creations Chicago, LLC Chapter 7: Accounting and Record Keeping James Scordo, Jr., McGovern & Greene LLP Chapter 8: Legal Steps in Hiring, Firing and Maintaining Employees Ethan Zelizer, DLA Piper LLP Chapter 9: Estate Planning for the Closely Held Business Brian Jones, Harrison & Held, LLP Chapter 10: Networking for Lawyers Mason Cole, Cole Sadkin, LLC Chapter 11: Online Marketing and Web Presence: 10 Steps to Creating an Effective Online Marketing Campaign Amy Masters, AM Creative, LLC Chapter 12: Growing Your Practice Through Referrals James E. Thompson, JD, Midwest Consulting Group, Inc. 30-31 STARTING AND GROWING YOUR BUSINESS 1 Preface S mall business is the driving force behind today's recovering economy. Due in no small part to the recent economic decline, the number of small businesses has grown substantially over recent years. Indeed, the number of small businesses providing business services more than doubled between 2007 and 2010 from 2.97 million to 6.03 million. Despite both growth in the number of small businesses and the small business industry in aggregate, these businesses continue to face significant challenges from the fallout of the recession and the failure rate for small businesses increased by more than 40% between 2007 and 2010. Many small businesses simply cannot afford the legal and professional services necessary to navigate the difficulties posed by the current business environment. The Chicago Bar Association Young Lawyers Section ("YLS") and the Small Business Advocacy Council ("SBAC") partnered to create this flipbook to provide small business owners with general information in a number of areas. Lawyers and business professionals have lent their knowledge and experience to provide insights into various issues that small business owners must address in starting and growing their businesses. This 12-part booklet includes advice on: writing a business plan; physical office space; virtual and shared office space; business to business equipment lease financing; legal structure; registering your business and state, local and federal taxes, permits, licenses; accounting and record keeping; legal steps in hiring, firing and maintaining employees; developing a marketing plan and networking; web and online marketing/presence; and succession planning for small business owners. While this book cannot and does not provide legal advice, it is intended to educate small business owners about many of the legal and business issues that small businesses face. By its very nature and breadth, this book cannot address every situation a small business might encounter. However, the following provides small business owners with the general framework for understanding how start or grow their businesses. For particular legal or professional questions, the YLS and SBAC encourage readers to seek advice from professionals who can tailor their advice to your particular situation. We hope that you find this flipbook helpful and we wish you much success in your future endeavors. Justin Lee Heather YLS Chair, 2011-2012 Member, SBAC Board of Directors Dunn & Bradstreet, "The State of Small Businesses Post Great Recession," which may be found at http://www.dnbgov.com/pdf/DNB_SMB_Report_May2011.pdf. STARTING AND GROWING YOUR BUSINESS 3 Business Plans M ICHAEL B ROMILEY AND M ARK Z ANDERS , G ENTRY V ENTURE P ARTNERS E veryone at one time or another has either had a great idea for a business, or has been approached by a family member or friend with a great idea. Whether it is as informal as "Mom, you should open a restaurant and serve these meatballs" to a more formally presented idea, these ideas are all around us. Many components separate an idea heard first around the dining table or on the golf course from an idea that results in a functioning business. A key component in that transformation is a business plan. Why is a business plan so crucial to a business? Planning is imperative for all businesses. The saying, "If you fail to plan, you plan to fail," appropriately captures the compelling necessity of planning. No one puts up capital to start a business planning to fail. An entrepreneur does not engage in business without a clear direction. In fact, the business plan bears it all; it outlines what the entrepreneur should do. It should be noted that before one can come up with a plan, one must be fully aware of the current realities of the business environment. The question, "Where are we and the market now?" must be answered. Once this is done, it is only then that one can come up with relevant and appropriate plans. Communication in the broadest sense is imperative throughout the life of the business. The ability to communicate, and communicate well, is one of the biggest factors in any businesses success. You could have the best product or service in the world, but if you're unable to promote your product and communicate effectively with clients and colleagues, your potential is limited. Another characteristic of a successful business is collaboration. Very few people can operate a business alone. Whether you are going to have a formal partner or partners, one or more employees, vendors to supply components or product, and hopefully many, many, customers, you need to be able to con- vey your view to others so collaboration is possible. A business plan will help everyone involved with your endeavor get on the same page. "In ten years of venture capital, I have heard maybe one bad idea. Ideas are cheap." Ray Lane, Managing Director Kleiner Perkins, April 2004 Businesses need a roadmap to define company values, create a singular vision and chart a direction for growth. The process begins with crafting a mission and vision statement, defining company objectives, and performing an analysis of company strengths, weaknesses, opportunities and possible threats. This process is called a SWOT analysis and can be compared to a compass. A business plan can be compared to a road map. You would never get in a car and start driving, hoping to find what you are looking for. You plan a route either mentally based on previous experiences, or sit down with a map. (Remember in 2004 when nobody had a GPS in the car?) Now imagine that everyone in your company got into their respective cars and just started driving. What are the chances you would all end up in the same spot? A business plan helps you see where you want to go and lets you avoid problems in the future that might not be apparent today. Identifying needs, both now and in the future, is another benefit of a business plan. How much product, capital, expertise, and employees are you going to need? When are you going to need them? Regularly review company objectives, goals, implementation plans and operational results. Without periodic review of these factors, the work performed in developing strategic goals will be wasted. Be realistic. Many businesses fail due to insufficient capitalization. Is the same person who makes the widget going to be able to market, sell, and support the product, and make sure every employee is paid, as well as paying the electric bill? Is that person able to accomplish all those tasks today? What about it in 2 years? These are all decisions that a start up needs to consider and that a growing business will need to confront. Realistic assumptions at every stage are critical. Nothing distorts resource allocation worse than unrealistic assumptions. While too optimistic assumptions can lead business owner to take on projects they can't complete or overhead they can't pay for, too pessimistic assumptions can leave a business unable to take advantage of opportunities that may present themselves in the future. Nobody has a crystal ball, but do your best to utilize an honest assessment. That assessment will provide you and everyone associated with your business the best framework to grow your business over the long haul. Creating a business plan isn't a onetime task. As your company grows and matures, a business plan needs to be updated in order to reflect the current realities of the company. Updating your business plan is the perfect time to talk to your employees on how to improve the company. As companies grow and mature, the frequency of updates is reduced. Make sure your business plan is currently applicable to your business. How will your business address these needs? Will you have time, as the STARTING AND GROWING YOUR BUSINESS 4 CHAPTER 1 founder of a company, to pay bills, keep the books, hire and manage employees, setup and maintain a computer network? Do you contract out or hire another employee for functions such as IT, accounting, and HR? Having a process in place to deal with such decisions is essential to ensure that you reach the most cost effective solution. These processes and procedures shall serve as a standard by which performance must be evaluated against such that, if you achieve or, better yet, surpass the established targets, then the business shall have succeeded. Otherwise, it has failed. In other words, they serve as benchmarks or key success indicators. Since, goals and objectives are vital in the definition of business success, a word of caution is therefore necessary. Objectives must be clear, measurable, realistic, attainable and time-bound. If we are to compare actual performance with it, then it has to be concretely quantifiable. Every business owner assumes that consumers CAN'T live without their product. Otherwise the owner wouldn't be in the business. But it takes time and resources to educate and expose consumers to your great product. How will the product be marketed? Do you need employees for this? Who will train the employees? You should have some of these answers or, at least, a process to get the answers in order to effectively market your product. What will be your target market? Resources are always scarce. What is the most cost effective group to market your product to? Sometimes businesses are so excited to make a sale that they don't consider the full cost of what they are doing. Since a plan establishes the business's directions and thrusts, it easily helps us determine which strategies STARTING AND GROWING YOUR BUSINESS and programs should be prioritized in terms of financial allocations as well as human resource allocations. One must understand that due to the dynamism of the business environment, an organization needs to respond to any change in the current picture. These developments and changes may pertain to competition, demographics, technology advancement, legal environment, social, or cultural. Most often, responses to the environment entails cost and other resource spending. They might sell product at too low a price compared with the costs of servicing the client, or waste time selling to an inferior market when there are better markets available. What does a good client look for in your company? Are there clients that are too small to be cost effective for your business to service? If clients are too small, they divert resources from clients that have better margins. Are there clients that are too large for our business at present? Too large a client can be just as detrimental. Would growing your business to service a large client put the sustainability of your business at risk if the client leaves? If you can't provide the service or goods that they desire, a company can develop a bad reputation in an industry. As always, it is good to know your ability and restrictions. Pairing with another company in the industry to deal with clients that don't fit your size preference is a good way to extract benefit from potential clients that don't fit your business at present time. A company might be very grateful for a client that is too large for your company and in turn provide clients that are too small for them. These situations can lead to some very mutually beneficial relationships. Many problems can't be foreseen, but this is even more reason to have a business plan. Setting up a frame work to solve problems that arise is essential. This allows partners and employees to react in a uniform manner to different situations. A business plan also should set boundaries. What decisions can an employee make independently? Who should they seek advice from and when should they seek it? Needing management to handle every little problem can be just as problematic as employees acting too independently. Starting and running a successful business is never easy. It takes hard work, determination, capital, and a bit of luck. While the vast majority of new businesses fail, not having a business plan leaves very little chance for success and growth. It is virtually impossible to anticipate every twist and turn a business will take, just like in life. A plan can make it easier to navigate the turns. Gentry Venture Partners Gentry Venture Partners is a specialized venture that leads or co-invests with some of the worlds' premiere venture capital groups in mid and late-stage financing for pre-IPO companies. GVP is active in a broad spectrum of investment sectors with a primary focus on cleantech, energy and information technology. Mike can be reached at email@example.com 5 Office Space M IKE L OMBARDO . B LUE S TAR P ROPERTIES M any factors come into play when it comes to choosing the right office space for your law firm. These factors include, but are not limited to, the location of the office, aesthetic of the building or space, lease concessions offered by the landlord, and, of course, lease cost. Some questions law firms typically ask themselves are: Do you need to be in close proximity to the courts? Do you or your employees come in on the Metra or the CTA? How much money in your budget has been allocated to lease cost? How much of a tenant improvement allowance will be needed to build out your ideal office space? Do you need private offices, open space or a mix of both? How many square feet should be allocated per employee? Does this square footage number change depending on whether the employee is a partner, associate or staff? What are the current market conditions in the Chicago commercial real estate market and, more importantly, what should you be paying in rent? These are all questions that one must ask when entering into a commercial lease transaction for a law firm. A lot of times, attorneys will attempt to find space on their own and enter into lease negotiations by themselves. However, engaging the services of a licensed commercial real estate broker that specializes in tenant representation has many advantages and should be seriously considered. Commercial real estate brokers vigorously represent the best interests of law firms in their lease negotiations with landlords and assist them in making the right decision for their firm moving forward. Sure, an attorney may know the ins and outs of a commercial lease. They may even be a real estate attorney themselves, but a commercial real estate broker's expertise lies in establishing relationships with the landlords in the city, knowing where the best available spaces are and creating leverage by creating a scenario where the various landlords are competing with and bidding against each other for your law firm's tenancy. Lease payments are typically the second most expensive cost to any law firm behind salaries. Signing a long term lease is an extremely important decision for any size law firm, big or small. It is the job of the broker to get these costs down as low as possible and ensure that the tenant knows every aspect of their lease so that there are no surprises. It is reasons like these that the largest and most established law firms in the city all engage the services of a commercial real estate broker. There are also a lot of issues that must be considered in any lease negotiation that the average tenant may not at first realize. Is the lease net or gross? A net lease does not include taxes or common area maintenance (also known as operating expenses). Thus, a prospective tenant will need to inquire as to what the most recent year's estimated tax and operating expenses are in order to fully understand the full lease costs. If it is a gross lease, is it modified gross or full service gross? A modified gross lease will have a `Base Year'. In this instance, the tenant will be responsible for its proportionate share of taxes and operating expenses above the base year. For example, if a tenant has 5,000 square feet in a 50,000 square foot building, the tenant has a 10% proportionate share of the building, so they will be responsible for their share of the excess tax and operating expense cost when they are reconciled by the landlord at the end of the year. If it is a full service gross lease, all of the real estate taxes and operating expenses are included in the lease and there are no base years or reconciliations at the end of the year. In addition to these concerns, a tenant should also know what expenses are STARTING AND GROWING YOUR BUSINESS 6 CHAPTER 2 included in the base rent and what are extra costs, such as janitorial services and utilities. Is the building run on a central cooling system and boiler for air and heat or does each unit have an individual package unit controlled by, and separately metered to, the tenant. If the HVAC is on a central system, does the Landlord charge an extra fee to run it during nights and weekends? If so, how much is this cost? Is the landlord offering rent abatement? If so, how much are they offering? A general rule of thumb in downtown Chicago is that a tenant should receive one month of free rent for every year of their lease. If a tenant signs a five year lease, they should receive 5 months of free rent. If a tenant signs a ten year lease, they should receive ten months of free rent, and so on. Another very important concession that a landlord will give is a "Tenant Improvement Allowance" in order for the tenant to build out its new space. Tenant Improvement Allowances can range anywhere from $5.00 to $10.00 per square foot for a space that is in relatively good condition and only needs minor adjustments in order to be habitable, to upwards of $50.00 or $60.00 per square foot for a raw space that is going to be built from scratch. A commercial real estate broker can help introduce a tenant to various architects to interview for the job of creating the best space, as well as help a tenant to interview general contractors to actually build the space. Another extremely important issue is market conditions. A tenant needs to have in-depth market knowledge of the Chicago commercial real estate market and every building in that market. How much is the building asking in rent? How much is a similar building across the street asking? A tenant who does his or her homework and understands the asking prices of competitive buildings can leverage these buildings against each other to drive the price down. A STARTING AND GROWING YOUR BUSINESS A general rule of thumb in downtown Chicago is that a tenant should receive one month of free rent for every year of their lease. If a tenant signs a five year lease, they should receive 5 months of free rent. tenant who is well educated on current market conditions knows the intricacies of each building in and out, builds a relationship with the leasing agents at each building, and can effectively achieve the best possible outcome for their firm. Another important aspect is timing. Commercial lease transactions take time. First, you must search the city and find out which buildings have space in your desired size range. Then you have to take the time to schedule tours of each building. When the options are shortlisted, proposals are sent back and forth between tenant and landlord until deal terms are struck. At this point, a letter of intent is drafted and signed by both parties. It is only at this point that a lease will be drafted. Then the lease will be negotiated for a couple weeks between both parties' attorneys. Finally, after the lease is signed, permitting and construction can begin on your new space, which usually requires at least 90 days from lease signing to completion. All told, the process of looking for new office space for a law firm can take anywhere from a month, for a small firm if they are moving into a space that is already built, to 9 months to a year for a large law firm that is building its new space from scratch. One of the most common mistakes made by tenants who have an upcoming lease expiration is that they wait until there is one month left on the lease, at which point it is too late. If a tenant stays in their current space past their lease expiration date, they will be considered in holdover and will have to pay a penalty equal to 150% to 200% of their rent. It is imperative that a tenant give themselves ample time to start the search well in advance of their lease expiration, sometimes at least a year in advance if the law firm is of substantial size, to ensure that they find a new space with enough time to meet their deadlines. Another reason to stay on top of this process well in advance if you are a tenant with an existing office space is because your current lease will most likely have important notice dates such as renewal, expansion, and termination options in which it is the responsibility of the tenant to notify the landlord of their intentions well before the actual termination date of the lease. As you can see, entering into a commercial lease is a lot more complicated than most people initially imagine. Whether you are a large law firm looking for your next move or an individual looking to start your own firm, these decisions should not be taken lightly. Start your search early or engage the assistance of a commercial real estate broker as early as possible in order to ensure you find the best deal possible for yourself and your firm. Again, the second most expensive cost to any law firm behind salaries is real estate costs. Make sure you keep this cost as low as possible. Michael Lombardo Michael is a broker with Blue Star Properties. Blue Star Properties is focused on restoration and reorientation of commercial property throughout the Chicagoland area. Mike can be reached at firstname.lastname@example.org 7 Serviced and Virtual Office Solutions A NGELA D OEMEL , S ERV C ORP E XECUTIVE S UITES AND V IRTUAL O FFICES C hanging times and economic conditions have brought about a shift in the way business is done in the world today. No longer is the traditional desk job in a large firm considered the only way to run a successful practice. The rise of the home-based business and the mobile worker has created an unprecedented demand for flexible workspace solutions. Serviced and virtual offices are redefining the world of work and offer businesses of all sizes flexible, innovative cost effective solutions. In the following article, we will explore the benefits of a serviced office or virtual office. We'll bust some myths around this sometimes misunderstood concept and give some tips on how to find the best provider for your needs. What are the Benefits of a Serviced or Virtual Office for small law firms? The advent of internet shopping has intensified the need for visibility online. Today's consumer is shopping the internet for services and making a decision before even speaking with you. Are you marketable online? Start up law firms need a smart efficient solution that will not only give their business a professional image and competitive edge, but also eliminate the huge upfront costs and obligation that a typical office lease entails. The concept of serviced and virtual offices is fast becoming the ideal solution that start ups have been searching for. A serviced office has all the benefits of an office space which gives a small law firm a fully-furnished office, complete with an already set up IT system, receptionist, and secretarial support staff to take care of the day to day duties, while enjoying an unbranded business space which they can present as their own. A prestigious commercial address on your business card and a receptionist as the face and voice of your company can be organized within minutes. The idea is quite simple: sharing the costs of the day to day running of an office will give you an infrastructure, staff, and fit out, that will make your business more successful and profitable. For start-ups, setting up an office can take months, plus there's the costs of hiring staff, finding furniture and that complicated task of trying to work out the nuances of setting up the internet, telephone and other technology. Not to mention the task and cost of training the new staff. A serviced office can eliminate all these headaches and you can literally be ready within minutes to focus on making your business a success. Now a virtual office is exactly that; you can be in two places at the same time. You can have a virtual office in the Loop, while you run your practice from the comfort of your Evanston home. You can have a recognizable Chicago address and phone number, all for a fraction of the cost of traditional office space. A virtual office blends home and work while maintaining a professional image of a traditional, high-end law firm, while also avoiding the daily commute. Growth and expansion can be easy with the added bonus of no long term commitments or contracts. Having the right IT set up is integral in ensuring your business is equipped with the right technology to support it in today's market. Serviced and virtual office clients can manage their business while on the go from any location in the world. Clients can easily book a boardroom in LA from their Chicago office or any other location, and are ready to go as soon as they arrive. The accessibility of running a business online and having the technology support is what can be the defining factor that helps a business stand out from the competition. There are many myths revolving around the virtual office or serviced office environment. What is fact and what is fiction? Here, we bust some myths to give you the whole story. MYTH ONE It's not as reliable! Many businesses feel that `looking' like a real business means they need dedicated full-time office space. They think that by having this solid base, they have a reliable base for their business to grow. This is not necessarily true � being tied to a long term office lease and the bills associated with such a commitment can actually hold your practice back. It can even reduce the speed that your firm grows as you'll be tied to a specific location and be limited on space. A serviced office and virtual office gives you the freedom to move around and grow your business. You will be able to conduct meetings in a high-end office setting and will not have the bills and hassle that go hand-in-hand with a full-time space. In effect, you are actually cutting your costs and freeing up your time in order for you to grow faster and work more efficiently. MYTH TWO It will look unprofessional if you don't have your own office. What looks unprofessional is having an office in a bad location, with no upto-date furnishings, computer equipment and no receptionist. With a serviced or virtual office you can conduct your meetings in a professional, well-polished location. You can have all of your mail and marketing material made up with your address so that those business associates who don't ever need to visit your office in person can still see that you're centrally located. Those that do need to come and see you in an actual office space can see you in an extremely professional and impressive environment. Even those that solely call you over the phone will be greeted by a professional receptionist. MYTH THREE It's too expensive! This is the biggest myth of all. A STARTING AND GROWING YOUR BUSINESS 8 CHAPTER 3 serviced office space is a shared expense and a virtual office is a fraction of the cost. The only thing expensive in the early days of business is paying for an office space you don't use and bills you don't need, only to be conducting all of your work outside of this space anyway. MYTH FOUR It is operated from a call centre. Some Virtual Offices are operated from a call center, but not all Virtual Offices were created equal. It's important to do your research. In many offices the receptionist operates from the location in which you have an office in. When your clients call to speak to you, they speak to a fully trained receptionist who knows you and your business. Whether or not a serviced or virtual office is the right fit for you, is up to you. Now that you know there are options to consider, how do you evaluate and choose the best service provider? Why does it matter? The opportunities with the right serviced or virtual office provider are what can set your business apart from the rest. A poorly run service provider can directly affect your own business. Examples of quality issues include lost or delayed messages from callers, misplaced mail or deliveries, shoddy facilities and machines in disrepair, unprofessional or overburdened receptionists and staff, and billing errors, to name just a few. Here are some factors to evaluate when deciding on which Virtual Office or Serviced office provider to sign up with: 1) The business address: Location, location, location! Just like residential real estate, your office location says something about your company. Is the actual office building in a desirable or prestigious area or on a well-known street? If so, you should see that occupancy is high which means a lot of business is being transacted there daily. There should also be high profile STARTING AND GROWING YOUR BUSINESS tenants in the building which gives you a competitive edge. 2) How is the interior decorated? Is the reception area well appointed, nicely furnished and flooring or carpets overall looking new, clean, inviting tasteful and makes a good impression? Pay attention to the little things because while your clients are waiting for you in the reception area, they will be evaluating you based on the look of your office. 3) Employees' appearance and dress: The first impression needs to be best, for your new clients visiting your office for the first time, and each time afterward. The staff at your office is a direct reflection of you. What impression do you give clients? 4) Signage: Is there signage advertising the office provider's name placed everywhere? If so, this is misleading and is confusing your visitors. Whose office is it really? 5) How do their employees greet you, greet your visitors, and answer the phone? Has the service provider's receptionist been well trained and instructed on how to be pleasant, speak effectively, and handle issues professionally? You can request to interview the team and see them in action. Ask if you can trial the services to ensure you know what you are getting. 6) Overloaded responsibility: Some serviced office providers cut back the number of employees to save money, and overburden those remaining with multiple tasks, leaving little time for your needs individually. What kind of service guarantee do they offer? Does the service provider increase the number of employees as the number of client's increases? You don't want your clients waiting on hold due to an overburdened receptionist. 7) IT Infrastructure: Does the office provider offer business tools and resources that will make your life easier? IT is one of the largest expenditures in business today. In order to be competitive and profitable, you need resources that can support you. Things like voicemail to email, electronic fax, VOIP phone technology, and online management of your account and phone settings will give you the kind of advantage you need to compete with the big guys on a modest budget. 8) Testimonials: Do a quick search on Google for reviews. Are there numerous negative experiences reported online about the service provider? Some Virtual Office providers maintain just a few locations in a few cities regionally. Others may have a presence in many US states, and some are large multinational services. Just because a provider may be the largest, doesn't mean it's the best. Research, visit, chat with employees and read reviews to get the best overall evaluation of a Serviced Office or Virtual Office service. The concept of a serviced or virtual office is not new; however, as a new and enthusiastic entrepreneur you may not be too familiar with this type of service. Instead of paying out large sums of cash to rent an office, hiring staff, purchasing furniture and equipment, and entering into a long-term lease agreement; you should consider looking into a serviced office or virtual office solution. Angela Doemel, ServCorp. Servcorp offers the world's finest Serviced and Virtual Offices solutions. Founded in 1978, Servcorp operates an international network of prime CBD locations throughout Australia, New Zealand, Japan, China, South-East Asia, India, Europe, the Middle East, United Kingdom, and United States. Servcorp's office and IT solutions enable companies of any size to operate with the corporate presence, IT, infrastructure and support of a multinational organization, without having the associated overheads normally required to do so. Angela can be reached at email@example.com 9 Business to Business Equipment Lease Financing What is Equipment Leasing? Obtaining the use of machinery, vehicles or other equipment on a rental basis. This avoids the need to invest capital in equipment. Ownership rests in the hands of the financial institution or leasing company while the business has actual use of product. Early Leasing Equipment leasing could be considered one of the oldest professions. Clay tablets discovered in The City of Ur predate 2000BC and are considered "hard evidence" that leasing was a form of financing for agricultural tools, land and water rights. There is also record of Babylonian leasing law, by King Hammurabi, dating back to 1700BC (Code of Hammurabi). The Railroad Era With the onset of the Industrial Revolution in the UK and the United States came more opportunities for leasing, particularly for the railroads. Investors provided financing for locomotives and railcars through equipment trusts, representing the right to receive a return on principal and interest on invested funds were sold to investors. There were many variations of the equipment trust, but the most recognized type of railroad financing was the Philadelphia Plan. This type of financing allowed the transfer of ownership to the end-user upon completion of an initial term. The Philadelphia Plan became the forerunner of today's conditional sales contracts and money-over-money leases. Independent Leasing Companies In the early 1900's, many railroad leasing companies recognized that longterm control and ownership was not always desired by the customer. Short-term contracts began to fill that request and those leases, at the expiration of the term, would be returned to the leasing company; this type of lease A NTHONY R OSCOE , E QUITY B UILDING F INANCIAL financing was the beginning of the true or operating leases, which are still common today. In other areas of leasing growth, the desire of manufacturers to provide financing for their products led to the creation of vendor leasing. Manufacturers or vendors felt they would be able to sell more products if they were able to offer an affordable payment plan along with the needed equipment. Some manufacturers saw further benefit and the ability to retain control of their proprietary equipment by creating "captive" finance arms of their business where leasing was the only option for the customer. Eventually, this monopoly like model came to rest with the enforcement of the federal antitrust legislation that required manufacturers to offer their equipment for sale as well. Apparently, those early manufacturers were right, as vendor and captive leasing continues as a significant force in the equipment leasing industry today. Equipment Leasing Today Due to the benefits of obsolescence avoidance, off balance sheet financing, tax advantages, 100% cost coverage and flexibility, leasing remains the single most widely used method of external finance in the United States. According to the 2011 Survey of Equipment Activity (SEFA), released by the Equipment Leasing and Finance Asso- ciation, 80% of U.S. businesses acquire equipment through leasing. The SEFA, which is based on responses from 108 ELFA member companies, covers key statistical, financial and operations information for the $521 billion equipment finance industry (http://www. m o n i t o r d a i l y. c o m / e l f a - s u r v e y -equipment-finance-activity-grew2010). Businesses today are leasing important equipment � from office furniture, telephones, computer hardware and software, postage meters, copiers and high tech medical equipment to trucks and construction equipment in order to free up capital and ensure that they are using the most up-to-date technologies. The Mechanics of Leasing A lease is a financial agreement (contract) in which a customer (lessee), pays a monthly, quarterly, semi-annual, annual rent or customized repayment structure, to an owner (lessor) for the right to use the equipment for a specific period of time. The type of equipment a company can lease is unlimited, as is the amount, since the focus is applied to the credit first and the collateral second. Computers, telephone systems, office furniture, manufacturing equipment, construction equipment and automobile repair equipment are but a few of the many types of capital goods typically leased. In addition to the cost of the equipment, "soft costs" such as training, design, installation and shipping costs can also be funded. Why Lease? � Ownership vs. Use- The only time ownership of an asset earns profit is when the asset appreciates over time. If it appreciates, it makes sense to own it. If it does not appreciate in value over time, then consider using the asset only as long as you need it. � 100% financing- Normally, no down payment is required. Since payment is made in advance, typically the STARTING AND GROWING YOUR BUSINESS 10 CHAPTER 4 only upfront cash required by the Lessee is the first & last payment plus a nominal doc fee. � Conserves cash and credit lines � Preserves working capital for use where it produces the best return. Normally bank lines should be used for working capital needs. � Bypasses budget restrictions � By funding the equipment on a lease, the payments can be made from a department's expense budget rather than capital budget. � End of Term Options � Depending on lease structure, there are several options available to the Lessee at termination: Automatic title transfer, return of the equipment, purchase the equipment or re-lease. � UCC filed on leased equipment only - Lessor files a UCC-1 only on the leased equipment. No additional collateral requirements beyond the leased item(s). � Long term fixed rate payments Once the lease is consummated, the rate is fixed for the duration of the lease. This removes the risk of rate fluctuation. � Customized Solutions � A variety of leasing products are available, which allow the lessee to tailor a program to fit cash flow requirements. These can include skip payments, ramping of payments up or down to match cyclical fluctuations. What are the Types of Leases and How Do They Work? Lease types are structured to match equipment needs, business goals and cash flow requirements. The most common types of leases are operating leases and finance or capital leases. These are types of leases used primarily by "for profit" entities. Another type of lease is the Municipal Lease offered to government bodies that receive tax revenues. Operating Lease An operating lease is particularly atSTARTING AND GROWING YOUR BUSINESS tractive to companies that continually update or replace equipment and want to use equipment without ownership, but also want to return equipment at lease-end and avoid technological obsolescence. An operating lease usually results in the lowest payment of any financing alternative and is an excellent strategy for bypassing capital budgeting restraints. It typically qualifies for offbalance sheet treatment and can result in improved Return on Asset (ROA) due to a lower asset base. It can also result in higher reported earnings in the early years of the lease. Finance or Capital Lease A finance lease is a full-payout, noncancelable agreement. Finance leases are most attractive in cases where the lessee wants the tax benefits of ownership or expects the equipment's residual value to be high. These leases are structured as equipment financing agreements with end of term buyouts of $1.00 or 10 percent of initial equipment cost. The lessee purchases the equipment upon lease termination at a preagreed amount. The term of a finance lease tends to be longer, nearly covering the useful life of the equipment. Municipal Lease A Municipal Lease is a conditional sale contract or Capital Lease purchase agreement to a municipality (taxing district) which obligates the governmental user to make principal and interest payments toward the purchase price of the leased equipment over a period of time. Since the interest is tax exempt for the lessor, the payments are less than payments under a Capital Lease. The end of lease option is a $1.00 buyout by law. Municipalities are identified as an agency, department or institution of any state, city, county, public school. These would include police departments, fire departments and highway departments to name a few. Federal government agencies are not eligible for Municipal Leases. The major benefits to the municipality who uses a municipal lease to purchase needed equipment, rather than issuing a bond, are as follows: 1. Voter approval is not needed for municipal leases 2. Overall costs to issue a bond under $1MM are much higher. 3. Municipal leases allow agencies to purchase needed and essential equipment now rather than wait for the next year's budget. 4. Financing can be completed in a relatively short period, so equipment is purchased at current prices. In Summary Business-to-Business Equipment Lease Financing is an alternative and affordable method of equipment acquisition for commercial, municipal and not-forprofit end users. New and pre-owned equipment from any manufacturer or vendor can be leased. Moreover, equipment vendors looking for additional sales tools to assist them close further business benefit from an affordable method of financing for their customers. Removing potential price objections at the front of the sales cycle allow the vendor to concentrate on the myriad benefits their product can deliver. Anthony Roscoe Anthony is Vice President of Equity Building Financial Equity Building Financial provides B2B equipment lease financing to the commercial, municipal, not-for-profit and school markets for new and pre-owned equipment from as low as $4,000.00 to $5 Million. They also provide this service as a sales tool to the vendors providing product as a way to make the acquisition more affordable for their prospects and customers. He can be reached at firstname.lastname@example.org. 11 Legal Structures for Business S EAN L. R OBERTSON , R OBERTSON L AW G ROUP, LLC T here are several different types of business entities when discussing legal structures for a business. There are five (5) different types of business structures that will be discussed in this article. These five (5) business structures are the following: � C Corporation � S Corporation � Professional Corporation (PC) � Limited Liability Corporation (LLC) � Limited Liability Partnership (LLP) These shareholder distributions are taxed as dividends or capital gains. Most small businesses do not operate as a C corporation because of double taxation. Generally, small business owners may want to consider a C corporation if they want to offer a generous healthcare plan and want a business deduction. In most cases, small business owners will elect to be treated as an S corporation. 1. Limited Liability Protection Similar to a C corporation, an S corporation has limited liability protection for its owners, which is separate and distinct from them. Again, one must follow proper corporate procedures to be eligible for limited liability protection such as maintaining good corporate records, no commingling of personal and business funds, and adequate capitalization. 2. Taxation An S corporation is considered a "pass through entity", which means that its' individual shareholders pay federal and state taxes based upon their profits, losses, and deductions and their particular tax scenario. Simply put, this means that the S corporation will not pay tax. Instead, the S corporation will only provide an informational return and the individual shareholders will assume the tax liability as individuals. Unlike a C Corporation, an S corporation does not pay taxes at the shareholder and employee level. Most small business owners generally are S corporations or Limited Liability Corporations. 3. Formal Corporate Structure One of the requirements of an S corporation is only one class of stock. One of the drawbacks of an S corporation is the rigidity of its requirements. In contrasts, a Limited Liability Corporation is a hybrid between a partnership and a Corporation. The formality of the structure becomes a big deal when a business owner desires to have multiple owners and investors. In business, shareholders and business entities have different goals and obstacles and, sometimes, the rigid structure of an S corporation does not allow for the S corporation to favor or customize its structure to the particular goals or circumstances of its shareholders. For example, John, Adam, and Sue start up a shoe business and Sue will only be investing $35,000 into the STARTING AND GROWING YOUR BUSINESS S CORPORATION According to the Internal Revenue Service (IRS), S corporations are corporations that elect to pass income, losses, and deductions down to the individual shareholders on their personal tax returns and to be taxed at their individual income tax rates. Simply put, small business owners use S corporations to avoid the double taxation of C corporations. There are special rules that govern the election of an S corporation. Generally, an S corporation must be a U.S. Citizen or Resident of the U.S; have no more than one hundred (100) shareholders; have one class of stock; and not be an ineligible corporation such as certain financial institutions, insurance companies, and domestic international sales corporations. Generally, an S corporation must be owned by a U.S. citizen or a Resident of the United States. Thus, if your client is not a resident or U.S. citizen, an S corporation is inapplicable to them. Second, an S corporation may not have greater than 100 individual shareholders. Third, an S corporation must only have one class of stock. For instance, owners of the S corporation may not have voting and non-voting stock. Thus, all of the shares of the S corporation must be voting shares of stock. Fourth, there are some corporations that are highly regulated and are not allowed to be an S corporation. To qualify for S corporation election, a Form 2553 "Election by a Small Business Corporation" must be filled out and signed by all shareholders. C CORPORATION A C corporation is a fictional entity that is created under state law to be separate and distinct from the business owner(s). Each State has separate laws which govern the creation of Corporations in their state. There are two (2) characteristics that describe a C corporation. Simply put, a C corporation is a business entity that does not elect to be treated as a small business. There will be a quick overview of a C corporation because it is not commonly used by small businesses. 1. Limited Liability Protection A C corporation has limited liability protection, which means that its' owners and the C corporation are separate from one another. Generally, a C corporation is only liable for the debts that it incurs and the owners of the C corporation may not be sued for the debts of the C corporation. As an experienced attorney, there are many exceptions to the general rule: if one does not maintain sufficient capital, operate their business like a business, and follow the formalities as established under the Business Corporation Act of 1983, 805 ILCS 5/. 2. Taxation One disadvantage of a C corporation is double taxation, which means that the business entity is taxed on its' business income and its' shareholders are taxed on any distributions made to them. 12 CHAPTER 5 business while John and Adam will be working full-time in the business. In this scenario, an LLC would allow Sue to be treated as a non-voting member/shareholder and get first priority in re-payment of her loan. With an S corporation, John, Adam, and Sue all must be voting shareholders. For an S corporation, your profits, losses, and deductions must be proportioned according to your ownership of shares. For example, if John, Adam, and Sue are one-third (33 percent) partners, each must share profits, losses, and deductions in proportion to their one-third ownership. With an LLC, John, Adam, and Sue could elect to share profits, losses, and deductions in whatever percentage they choose, as long as it is for a legitimate business purpose. In the above-examSTARTING AND GROWING YOUR BUSINESS ple, Sue may desire to share fifty (50) percent of the profits of the LLC for the first two years due to her risk of investing $35,000. Thus, an LLC allows shareholders and owners to structure their investments based upon real life concerns. 4. Run by Board of Directors An S corporation is run by Board of Directors, which are appointed by their shareholders. For example, shareholders in Illinois elect the President, Treasurer, and Secretary or any other officers of the S corporation. In contrasts, an LLC may be run by its' members (owners) or managers (similar to board of directors). Simply put, an S corporation is a popular business entity because it is less costly and generally costs $175 to incorporate in Illinois. In contrasts, an LLC generally costs $500 to incorporate in Illinois. Professional Corporation (PC) The State of Illinois has authorized professional service corporations under the Professional Service Corporation Act. 805 ILCS 10/. This Act enables individuals and partners to work together under a corporation that share the same professional license, such as a law license, to conduct their business under a corporation. A Professional Corporation may be a C Corporation or an S Corporation as explained above. >>> Continuted on next page 13 CHAPTER 5 Continuted from page 13 LIMITED LIABILITY CORPORATIONS (LLCs) A Limited Liability Corporation is a mixture between a partnership and a corporation. One of the complaints about a corporation is its' rigid corporate structure. In contrast, a partnership has no limited liability protection, but has a lot of flexibility where the business owners may adopt a flexible operating structure. 1. Limited Liability Similar to an S corporation and a C corporation, an LLC has limited liability protection separate and distinct from its owners. The Limited Liability Company Act, 820 ILCS 180/, governs the creation and operation of LLCs in the state of Illinois. Owners of an LLC are called "members" and there are two (2) types of management structures of LLCS in Illinois. These two (2) structures are "member-managed" and "manager-managed" LLCs. A membermanaged LLC is run by the owners of the LLC. In contrast, a manager-managed LLC is similar to a Corporation because the member(s) elect officers to conduct the day to day affairs of the LLC. 2. Flexibility LLCs are a great business entity because they allow owners to customize their business operations according to their goals and objectives. For example, a law firm can have one (1) managing partner and two (2) junior partners and allow the managing partner and junior partners to form an LLC together. The managing partner likely wants to maintain all or most of the voting control of the LLC while giving the junior partners an incentive to work hard. With an LLC, the managing partner could be the only voting member where as the junior partners could be non-voting members. The benefit of this flexible structure is several purposes. The first purpose is to allow the managing partner to run the day to day affairs of the LLC where he or she has significant experience. In contrast, the non-voting members generally have greater liability protection because they are like shareholders in a public owned company. Essentially, the junior partners are investors with limited voting rights and lessened liability concerns. Non-voting members may not run the day to day affairs of a business but generally are employees that want to be incentivized to contribute to the law firm. Furthermore, this structure would also enable the managing partner to set up an easy transition system in case one partner wants to leave the law firm's business. Generally, a non-voting member may participate in the profits of an LLC. If one junior partner left at the end of the first quarter, their wages and profits are limited to their salary and percentage of profits for the first quarter. There is no buy-out of the junior partner's interests. Another example of this flexibility would be a law partner that has worked hard to establish the law firm for five years and wants to add his new associ- ate(s) as partners in the near future. The new associates/partners understand that the managing partner should benefit for his or her hard work, but the business reality is that to keep the new associates/partners they may have to get a greater percentage of the law firm business. For instance, Sue, John, and Becky enter into a law firm business together as an LLC and Sue is the managing partner while John and Becky are the new associates that will be elected to junior partners. To reward Sue for her hard work with the law firm, Sue gets seventy-five (75) percent of the profits of the law firm for the first three years and, after this, Sue's share of the profits drops to fifty-one (51) percent. With an LLC, its' flexibility can account for the business realities that business and partners face. 3. Taxation An LLC is a disregarded entity for federal tax purposes, which means that one acts like the LLC did not exists. Thus, members pay federal and state taxes as though they were not incorporated and acted as a sole proprietorship or partnership. An LLC is considered a STARTING AND GROWING YOUR BUSINESS 14 CHAPTER 5 C. Taxation An LLP is taxed as a partnership and each partner is taxed based upon their individual tax traits. Each partner reports their portion of the company's income or loss on IRS Form 1065, Schedule K. A general partner's income is subject to income and self-employment tax while a limited partner's income is passive income or loss. Passive income or loss is not subject to self-employment tax. Unlike an LLC, an LLP must pick its tax classification as "Partnership". An LLC may choose to be taxed as a corporation or partnership, but it is assumed that its tax classification is a partnership. "pass-through" entity because its' owners pay federal and state taxes on their tax return. The IRS allows an LLC to be taxed as a Corporation or a Partnership. If no election is chosen, it is assumed that the LLC is taxed as a Partnership. partner is personally liable for the business debts of the LLP. This weakness may be easily fixed by incorporating the general partner has an S corporation or LLC. In contrast, a limited partner's liability is generally limited to their initial investment. The general partner is responsible for managing the day to day affairs of the LLP and, generally, the limited partners may not participate in the management of the LLP. The main difference between an LLC and LLP is that an LLC is not comprised of a general partner and limited partners. An LLC has the flexibility to make arrangements such as this, but there is no requirement of having a general partner and limited partner. B. Flexibility Similarly to an LLC, a LLP has a great deal of flexibility. The best feature of a LLP or partnership is its' flexibility. This flexibility means that the LLP enables different voting and non-voting ownership interests. The flexibility feature is important because often times a partnership or a law practice has different goals that the flexibility trait allows the LLP to meet. CONCLUSION Picking the correct business structure is essential to business protection and growth purposes. A qualified attorney should advise you on your different options based upon your particular goals. As a general rule, S corporations are great business entities for one (1) person businesses that have no desire for partners or investments. In contrasts, LLCs and LLPs are advantageous when one or more persons desire greater growth potential and have more complex business arrangements. Costs and tax structure are also important criteria when determining the correct business structure. LIMITED LIABILITY PARTNERSHIP (LLP) The Illinois legislature created the Uniform Partnership Act, 805 ILCS 206, to regulate the affairs of partnerships. The Uniform Partnership Act defines a "Partnership" as an association of two (2) or more persons to carry on as co-owners of a business for profit formed under Section 202 of this Act, predecessor law, or comparable law of another jurisdiction. 805 ILCS 206/100(f). A Partnership may elect to be incorporated as a "LLP". 805 ILCS 206/100. Limited Liability Partnership (LLP) is similar to an LLC because it offers a lot of flexibility but has several distinct differences from an LLC. A. Managing Partner has No Liability Protection A LLP is comprised of a general partner and limited partners. A general STARTING AND GROWING YOUR BUSINESS Sean L. Robertson Sean is Managing Partner of Robertson Law Group, LLC which concentrates in asset protection, corporate law, estate planning, and commercial litigation. He has significant corporate, litigation, and asset protection niche, which caters to closely-held business owners, physicians, and individuals that are concerned about litigation risks. Sean can be reached at sean@RobertsonLawGroup.com 15 Registering Your Business T RENTON B AVARO , C ORPORATE C REATIONS C HICAGO , LLC T he foundation of the legal existence of your new business is creating the legal entity under which you will operate. Even when the business plan is written, office space is secured, and prospective clients are at your finger tips there are still phone calls, paperwork, and filings to be completed just for your company to be legally recognized. Once your legal existence is created there are ancillary registrations to be completed. Every business will be subject to different requirements but the following registration checklist can be used as a general overview of the steps needed to operate in accordance with law. � Forming your legal entity (Corporation, LLC, LLP, etc.) � Registering your legal entity with the Secretary of State's office in the state you are transacting business in, if different then the state of formation � Obtaining a federal tax id number from the IRS � Registering with the Department of Revenue � Registering your law firm with the Illinois Supreme Court � Obtain city and/or county business license(s), if required � Determine if your specific line of business requires additional licenses or permits from the city, county, state, or federal governments � Maintain legal compliance with annual renewal obligations After deciding on the legal structure you want your business to take, you are ready to create the legal existence of your company. A legal entity is created when the appropriate formation documents are filed with the office of the Secretary of State. A corporation files Articles of Incorporation and other legal structures such as a Limited Liability Company will file Articles of Organization, although some states refer to these filings by other names. Whether or not you will have a physical presence or conduct business in a state does not preclude you from filing your formation documents there. The only requirements are choosing a company name distinguishable than any on record and the appointment of a registered agent located in the state to accept government documents and legal papers on your company's behalf. The decision to form your legal entity in a state will dictate which statutes will govern filing fees, taxes, officer/director disclosure requirements, internal procedures, and other rules of operation. These regulations and laws vary from state to state so the best way to make an informed decision on which state to create your new legal entity in is to research the controlling statutes or speak with an experienced individual. No matter which state you decide to form your business, every state has statutes requiring registration with the office of the Secretary of State if a company will be transacting business within its borders. If you have decided to create your legal existence in a state outside of where you will be transacting business you will need to perform filings with the office of the Secretary of State in each state. In addition to multiple filings your company will also be required to maintain registered agents in both states and will have additional annual compliance requirements. In Illinois for example, all legal entities are required to file an annual report once per year to remain in good standing. The report is due by the first day of the anniversary month in which you were registered and the fee is dependent on the type of structure you have chosen. Failure to file an annual report can lead to additional penalties and eventual administrative dissolution of your legal existence. Many businesses decide it is best to form their legal entity in the state they intend on doing business in. In Illinois, many small business owners form under the laws of their home state. This eliminates the potential for multiple filings, fees, and additional disclosures for registering your company in other states. If the company begins to expand and starts to transact business in other STARTING AND GROWING YOUR BUSINESS 16 CHAPTER 6 states, only then will the need to perform additional registrations arise. Once your company is registered with the Secretary of State's office in the state you will be transacting business in, either by forming in a different state and registering to transact business here or by forming in your home state, the next step is to obtain your Federal Employer Identification Number (FEIN) from the IRS. Much akin to a social security number identifying an individual the FEIN is used to identify your business. The IRS requires the completion of Form SS-4 to obtain this number. If your company is electing to receive special tax treatment, such as electing to be an S chapter corporation, now is the time to file these forms as well. To elect be taxed as an S-Corp, your company will need to submit IRS Form 2253 within 75 days after forming your business. This form can be submitted to the IRS after you first obtain your FEIN. With your formation documents and FEIN you are now in a position to open up a bank account in the name of your business. Most banks require a copy of the formation documents, your newly assigned FEIN, and a state id to open the account. It is possible you may need additional proof that the individual attempting to open an account on behalf of the business actually has authority to do so. This can be proven easily if their name is in the formation documents. If a third party incorporator was used, a signed consent form indicating the incorporator has transferred power to a particular individual will suffice. After your company is formed and your FEIN is obtained, your company will need to register for state taxes with the Department of Revenue within the state you are transacting business in. If you are in Illinois, you will need to contact the Illinois Department of Revenue. You may apply online, by mail, or in person by completing form REG-1 to register with the state and obtain your STARTING AND GROWING YOUR BUSINESS Illinois Department of Revenue number (IDOR #), formerly known as your Illinois Business Tax number (IBT #). The form will require your Secretary of State file number and FEIN along with other business and officer information. If your company is planning on having employees you will also need to file with the Illinois Department of Employment Security. Every newly created company that will have employees has to file Form UI-1 within 30 days from when it commences business. Filing the form is mandatory although it does not necessarily mean your company will be liable for payments under the Unemployment Insurance Act. Attorneys forming their own business to practice law in Illinois are subject to an additional filing requirement with the Illinois Supreme Court. Any Professional Corporation, Professional Association, Limited Liability Company or Registered Limited Liability Partnership must file an Application for Certificate of Registration to engage in the practice of law along with a $50 filing fee. Each individual that has an ownership interest in the business must be a member of the bar of each jurisdiction they engage in the practice of law and have no pending disciplinary proceedings against them. The new law practice can elect to apply under Supreme Court Rule 721 which provides for joint and several liability or under Supreme Court Rule 722 which provides the business with the ability to avoid joint and several liability. To qualify under Rule 722 the firm must maintain minimum insurance or proof of financial responsibility according to Supreme Court Rule 722(b)(1). The Rule is available online and a thorough reading will offer a more detailed explanation of the requirements. The same application must be submitted annually for renewal along with $40 on or before January 31st of each year. Regardless of what city your busi- ness is located in it will be necessary to check with the governing body to determine if your company has to apply for a business license. In Chicago, for example, new businesses will need to submit a Business Information Sheet with the City of Chicago Department of Business Affairs & Consumer Protection (BACP). This pre-application can be filed online, in-person, or by mail and will be used to determine what type of licenses your business will need and additional filings that may be required. Every business that operates as its own legal entity will need to perform multiple registrations and filings just to be legally recognized. Filings with the Secretary of State's office, the IRS and the Department of Revenue will be mandatory. Depending on the type of business there may be additional registration and filing requirements. To be certain your business is operating legally check with your local and state government agencies or talk with an experienced professional. It is important to take the time to reach out to various government agencies so that no filings are forgotten. After your business has met all registration requirements and obtained the necessary licenses and approvals it is equally important to keep filed copies in your company's records and be conscious of renewal filings. Forgetting to file a renewal can be just as harmful as forgetting to register in the first place. For your new company to be legally recognized to operate it is necessary to file the proper registrations. Trenton Bavaro Trent is an Illinois licensed attorney and Vice President of Corporate Creations Chicago. A background in business and law fuels his passion to help others understand complex concepts and make comprehensive decisions regarding the registration of their businesses and subsequent compliance filings. He can be reached at email@example.com 17 Accounting and Record Keeping Cash versus Accrual Accounting There are two commonly used methods of accounting for your transactions: Cash and Accrual. The Cash Method records transactions when the cash is received or paid out. For example, you provide service to your client on December 30th. They don't pay you until January 5th of the following year. On the cash basis you would record income on January 5th. Similarly, if you receive office supplies on December 30th and don't pay for them until January 5th, you would record the expense on January 5th. The Cash Method is the simpler form of accounting. The Accrual Method says that you should record transactions when they happen, regardless of when the cash comes in or goes out. The Cash Method may be simpler, but the Accrual Method is more accurate. Going with the above examples, you performed the service in December, so you should record fees earned in December. You received the office supplies in December, so you record the expense in December. Concepts like "Accounts Payable" and "Accounts Receivable" are accrual concepts and not used at all in the Cash Method. If your company produces or sells merchandise, you must keep an inventory and use the accrual method. Which should you use? Both methods are valid for filing your income tax return. If you think you'll need to get financing for your business, or if you'll be required to have an audit or review, you should use the Accrual Method. If your business is simple and you won't need to go to the bank, the Cash Method is easier. If you want your financial statements to give you the most accurate picture about how your business is doing, use the Accrual Method. If all you care about is how much cash you are generating, go with the Cash Method. a summary of your business transactions in journals and ledgers. These used to be kept in books, but most business use accounting software programs, such as Intuit's QuickBooksTM, which can be configured specifically for your business to streamline the process of recording your business transactions. While most accounting software programs are user friendly, unless you or your employee have extensive experience in this area, hiring a professional to create a chart of accounts and train you and/or your employee(s) how to record transactions properly will save time and money in the long run. Professionals may be certified in bookkeeping and/or specific accounting software programs, which you may consider when hiring someone to perform these services. The types of journals and ledgers you keep will depend on the type of business you are operating. With properly configured accounting software, many of the journals and reports you need can easily be printed out directly from the system. � Business checkbook. � Daily summary of cash receipts. � Check disbursements journal. � Employee compensation record/ payroll journal. The business checkbook is typically the most important ledger for a small business. The business checking account should be used for business transactions only and should be reconciled on a monthly basis. If all of the transactions of the business checking account are recorded properly, the other journals and ledgers will largely fall into place and be created automatically through the accounting software program. In the case of attorneys and others providing professional services, there are programs that specifically track and record your time spent by date and client. Many of these programs generate invoices and integrate directly into your accounting software program. Using these programs can save a significant J AMES S CORDO , J R ., M C G OVERN & G REENE LLP amount of time that would be spent manually creating invoices and separately recording the associated transactions. Recordkeeping It is important for all businesses to keep accurate and timely records. Good recordkeeping will help you measure the progress of your business. It is important to understand how your records will be used and what you will need for proper recordkeeping. Uses of Records Your records are used to prepare your business' financial statements and tax returns. That means that the documents are only as good as the records used to create them, so make sure your records are complete and accurate. The two main financial statements are the Income (a/k/a Profit and Loss) Statement and the Balance Sheet. � An Income Statement shows the income and expenses of the business for a given period of time. � A Balance Sheet shows the assets, liabilities, and your equity in the business on a given date. Your financial statements generally serve two functions: 1) they let you see how well your business is performing; and 2) they let outsiders, such as your banker or other creditors, see how well you are performing. The more reliable and complete the underlying records, the more relevant and reliable the financial statements. The other financial document based on your records is your income tax return. Your records must support all of the items reported on the tax return including income, expenses, and credits. The records used in the preparation must be kept in the event the IRS conducts an examination of your tax return. Your records should identify the sources of any money you receive so that you can properly distinguish between business versus non-business receipts and taxable versus nontaxable inSTARTING AND GROWING YOUR BUSINESS Recording Business Transactions A good recordkeeping system includes 18 CHAPTER 7 come. Deductible expenses should be recorded when they occur, as it is easy to forget them later on. Types of Records to Keep There is not one standard recordkeeping system that applies to all businesses. You may use any system that clearly shows your income and expenses. Your recordkeeping system should include a summary of your business transactions. This summary is typically made in your "books" which include items such as general ledgers and accounting journals. Your gross income as well as your deductions and credits must be recorded. While the business checkbook is the main source of entries for most small businesses, the checkbook can be maintained and reconciled within your accounting software. Supporting documents must always be kept. All records and supporting documents may be kept electronically, however it is important that secure copies be kept in separate locations in the event of a computer failure, a fire, or some other catastrophe. Supporting Documents Sales, purchases, payroll, and other transactions that define your business generate supporting documents. These include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain information you need to record in your books. It is important to keep these documents because they support the entries in your books and on your tax return. Gross receipts. Gross receipts are the total amounts your business received without subtracting costs or expenses. You should keep supporting documents that show the amounts and sources of your gross receipts. Supporting documents for gross receipts include the following: � Bank or online deposit slips � Receipt books � Invoices � Credit card charge slips � Forms 1099-MISC STARTING AND GROWING YOUR BUSINESS Purchases. Purchases are the items you buy and resell to customers. Purchases are what will determine the value of your inventory at the end of any given year. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for purchases. Supporting documents for purchases include the following: � Canceled checks � Credit card slips � Invoices Expenses. Expenses are costs (other than purchases) necessary to run and maintain your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Supporting documents for expenses include the following: � Canceled checks � Account statements � Credit card slips � Invoices � Petty cash slips for small cash payments There are additional, specific recordkeeping rules that apply to Travel, Transportation, Entertainment, and Gift Expenses, as well as Employment Taxes. For example, if you choose to expense business mileage, you should maintain a log of all miles driven, including date, starting and ending odometer readings, starting and ending locations, and the purpose of the drive. You would do this for ALL mileage, not just business miles, even though you only expense the business miles. Without this type of documentation, the IRS will disallow your mileage expenses. Assets. Assets are the property, such as machinery and furniture you own and use in your business. You need records to determine the annual depreciation and the gain or loss when you sell the assets. Typically a list of assets is kept in a spreadsheet including the following information: � Description of the asset � Expected life span of the asset � When and how you acquired the asset � Purchase price � Cost of any improvements � Section 179 deduction taken � Deductions taken for depreciation � How you used the asset � When and how you disposed of the asset � Selling price � Expenses of sale The supporting documents where this information can often be found include: � Purchase and sales invoices � Real estate closing statements � Canceled checks Fraud Considerations One of the main ways to prevent fraud from occurring in your business is to segregate duties. This is especially challenging for small companies, because sometimes there are just not enough employees to properly segregate all of the functions. As the business owner, taking the following actions could greatly reduce the likelihood of a checking account-based fraud occurring or continuing for an extended period: � Review all checks along with their supporting invoices. � Personally sign all checks, put the checks in their respective envelopes and seal them, and put the envelopes in the mail. At no point should any of these tasks be delegated or the documents given back to the employee in charge of the accounting function. � Receive monthly bank statements directly (unopened), review the transactions and copies of canceled (cleared) checks, and promptly reconcile the account. James Scordo, Jr. CFE, CSAR is a manager at McGovern & Greene LLP James has consulted on a multitude of both internal and external fraud examinations for real estate, manufacturing, hospitality, construction, gaming, retail and non-profit entities specializing primarily in data analysis and forensic accounting procedures. He can be reached at firstname.lastname@example.org 19 Legal Steps in Hiring, Firing and Maintaining Employees Part I Recruitment of employees is a multifaceted process which can involve print and online advertisements in national and local newspapers or trade press, listings with government employment services, private personnel agencies, professional recruitment services (head hunters), on-line job and resume listing services, internal and external networking systems across companies and industry sectors, and good old-fashioned word of mouth communications. The methods and manner of employer recruitment is generally free from restriction and regulation, with the one notable exception that employers must avoid unlawful discrimination in the selection of employees. Employment contracts are the exception rather than the rule, with the vast majority of employment relationships being considered `employment at-will.' The employment at-will doctrine means that employment is presumed to be voluntary and indefinite for both employees and employers. An at-will employee under the doctrine may quit his/her job whenever and for whatever reason they want, usually without consequence. In turn, atwill employers may terminate employment whenever and for whatever reason they want, usually without consequence. Either party may end the relationship without prior notice, but neither party may breach contracts, either individual or collectively bargained. Employers cannot violate state or federal laws, and generally cannot rightfully terminate employees who refuse to do something that is contrary to public policy and sound morality, such as breaking the law. But with these few exceptions aside, either party may terminate the employment relationship 'for a good reason, a bad reason or no reason at all. The payment of compensation to employees in the United States is subject to protections at the federal, state and local government levels. Most notably, these include minimum wage and overtime protections for 'non-exempt' employees (i.e. employees other than managers and supervisors). Potentially, any person hired to perform labor or services for pay is an employee. Any persons, including a corporation or other entity and its agents, who hire an individual to perform labor or services for pay, are employers. E THAN Z ELIZER , DLA P IPER LLP Vetting and screening Employers must take care to avoid discrimination on the bases reviewed above in hiring employees. However, because of the concepts of negligent hiring and respondeat superior, they also must be careful to assure that the employees who will represent them to the public are qualified to do so and do not have histories indicating that they will present threats to the health and safety of other employees or the public. Accordingly, the process of vetting and screening new hires is of great importance. Offers of employment are often made subject to the following: � Evidence of identity and right to work in the US; � Background checks, including obtaining satisfactory references; and � Where appropriate, criminal record checks. volunteers such information, the employer who uses the information to discriminate can be held liable. It is important that all those involved in the interview process understand these limitations, since the actions of employees can create liability for the business. Do not make any promises during the interview process. Employers should not bind themselves to conditions regarding discharge, benefits or policies and procedures. In Illinois, the general rule is that employees serve at the will of the employer, although numerous judicial decisions have created exceptions to this doctrine. Any promises could create an implied contract or a legal promise known as promissory estoppel that could bind the employer to the promise. Criminal convictions The use of a criminal conviction policy can not only help an employer better protect itself and the public from someone with criminal tendencies, but also may protect an employer from potential negligent hiring lawsuits. Be sure to focus on convictions, not arrests. Arrests may not be a legitimate, non-discriminatory reason for excluding an applicant. Instead of flatly refusing to hire any applicant with a criminal conviction record, an employer should determine whether its criminal conviction policy measures the minimum qualifications necessary for successful performance of the job in question. The relevant question becomes, 'What kind of crimes would prevent a job applicant, if convicted, from being qualified for a particular position?' Where the conviction relates directly to the primary job functions and where public safety might reasonably be compromised, courts have been supportive of employer hiring bans. Applications and Interviews On the job application form and during interviews, tailor your questions so they are job related. Ask all applicants the same basic questions. Be aware that federal and state laws place numerous restrictions on the types of questions that may be asked. For example, an employer cannot discriminate based on certain characteristics such as age, race, color, gender, religion, disability, marital status or national origin, so inquiries in the interview process must avoid these subjects. Sexual orientation is also protected under Illinois law. Even casual questions about protected characteristics can potentially create liability. Further, if an applicant References It is usual for prospective employers to ask job applicants for references from prior employers. An employer is not obSTARTING AND GROWING YOUR BUSINESS 20 CHAPTER 8 ligated to provide a reference and an individual employer's willingness to do so is often determined by the character of the prior employment relationship. However, because some courts have allowed defamation suits by former employees for negative references, some employers have adopted policies limiting the information they will reveal in reference checks. For example, a typical policy might be to verify only such routine personnel information as name, social security number, dates of employment, and position title, with additional information being provided only if authorized in writing by the former employee. maintain a cause of action under Title VII without the employee having been subject to discipline, termination, or some other adverse employment action. While managers have the right to exercise independent judgment as to the merits of an employee's performance, employers can decrease the probability of being sued by utilizing standards that are clear, objective, fair, and consistently applied. To meet this goal, ensure that the following objects are implemented across all areas of the organization: � Duties: develop a job description that defines the essential functions of the employee's job and also states the standards by which the employee's performance will be measured. � Notice: put the basic elements of the disciplinary program in writing so that employees are aware of the consequences of their failure to adhere to written policies. Written procedures ensure consistency and reduce the risk that different supervisors will give varied interpretations and explanations of a particular policy. Written procedures are also an effective way to communicate a universal message to all employees. was offered the opportunity to sign, but declined; and to the extent possible, keep all information confidential. PART III: Termination What an Employer Should do Prior to Terminating an Employee � Give honest performance appraisals. � Document and discuss poor performance with an employee and give him or her a chance to correct his/her deficiencies. � Make sure that other employees, guilty of the same infraction, were similarly disciplined. � Identify who will conduct termination interview and who will be a witness. � The manager responsible for conducting the interview should be given a script of what to say and what not to say. � Consider timing of termination meeting. Do not meet prior to birthdays, holidays or the like. � Determine how an employee will collect his or her personal effects following the termination meeting. Part II: Employee Discipline Best Practices While disciplining or terminating employees is never an easy task, it is a task that all organizations must be prepared to carry out. Good habits for discipline or termination begin far in advance of the actual decision, and revolve around three basic principles: 1) honesty; 2) consistency; and 3) documentation. Termination Meeting � Keep the meeting brief (10-15 minutes); employers should make the firing a statement of fact, not open to discussion. Allow the employee an opportunity to respond. � Collect employee's keys and security cards. � Barring legitimate security concerns, employee should be permitted to leave the building on his or her own (as opposed to being escorted from the building by security). � Consider providing employee outplacement services; if such services are going to be provided, have the outplacement consultant on-site on the day of the termination meeting. � Provide balanced but truthful job references to prospective employers. � Consider providing severance pay; Ethan G. Zelizer Ethan is a lawyer in DLA Piper's Labor and Employment Practice, based in Chicago. He represents and advises employers in all aspects of employment law, including discrimination, wage and hour, Sarbanes-Oxley actions, employment mobility issues, and regulatory complance. He can be reached at email@example.com Honesty Although it is a simple mantra, it is worth repeating: always be honest and truthful when dealing with your employees. Dishonesty or delay heightens the risk of litigation. An employee who is not told why he or she is being disciplined or terminated is likely to assume the decision is illegal. It is easy to approach discipline or termination decisions with the belief that criticism will demoralize the employee. Avoid this sympathetic tendency, because it later becomes difficult to explain contradictory disciplinary actions. Commit to providing honest performance appraisals and encourage supervisors to conduct corrective action in a timely fashion. Documentation While virtually every employer recognizes the need for written documentation supporting any employment decisions, most employers do not consider the legal consequences of inadequate documentation. Managers must realize that their organization may have to explain a disciplinary action or other decision several years after it occurs, and documentation is key when memories are weak or individuals involved in the decision are no longer employed. To this end, all disciplinary or termination documentation should include the following: the date of the event; the name of the person conducting the disciplinary or termination procedure; the subject of the corrective action should be described in detail, including when, how, where, and why the corrective action occurred; all individuals participating in the corrective action should be identified; the employee should sign the document or the document should reflect that the employee Consistency Applying consistent principles to the discipline of employees will provide a sound basis for the defense of most post-termination lawsuits. Most employment related lawsuits arise from discipline or termination decisions. Indeed, it is difficult, if not impossible, to STARTING AND GROWING YOUR BUSINESS 21 Estate Planning for the Closely Held Business Estate Planning for the Closely Held Business This chapter is intended as a broad overview of some of the things a business owner might consider as a business grows and its owner's net worth and age advance. In rough chronology of a business owner's life cycle, below are some techniques a business owner may want to discuss with a trusted advisor. Many of the topics which would initially be raised by an estate planning attorney, such as business entity selection, registration and corporate formalities, have already been touched on in other chapters. B RIAN J ONES , H ARRISON & H ELD , LLP Core Estate Planning Documents While not specific to business owners, it is the author's opinion that everyone, regardless of wealth, should have the following core estate planning documents in order: Powers of Attorney � These documents are statutory in nature and require minimal creativity, time or expense. The consequences, however, of not having them in place could be disastrous (an example being the recent case of Terri Schiavo). A power of attorney for healthcare allows the principal to designate an agent to make healthcare decisions on their behalf, in the event they're unable to communicate their own wishes. It also gives the option of expressing a preference on organ donation and end of life decisions (e.g. your views on feeding tubes, respirators, etc.). A power of attorney for property allows the principal to designate an agent to make financial decisions on their behalf in the event they're unable to communicate their own wishes. This may also include limited powers to make decisions relating to the closely-held business. Revocable ("Living") Trust � While a Will is a document that, upon death, outlines your final wishes in regards to your assets and personal prop- erty, a trust, on the other hand, can be created for asset management both during your life and continuing after your death (a revocable trust is created during your lifetime and becomes effective immediately). You can be the trustee of your trust while living, and (upon your mental incapacity or death) your successor trustee(s) can step into your shoes immediately and start handling your financial affairs without a court order. This immediate succession is essential for a business owner. Pour-over Will � A pour-over will is used in conjunction with a revocable trust. Under this type of plan, the only beneficiary of the will is your Trust. A pour-over will serves as the "catch all" in case an asset is held in decedent's name and "pours it over" to the trust after death (additionally, the pour-over will is where guardians for minor children are appointed). Startups As a business owner and member of the local business community, you may be presented with an option to invest in a new business venture. Perhaps the easiest layup in the advanced estate tax planning game is the equity dispersion for a startup company, a startup fund, or any new equity investment. Using Trusts as Equity Investors in Startups For gift tax purposes, the value of a gift is its fair market value. The Regulations speak in terms of a hypothetical willing buyer and a hypothetical willing seller and provide that the "fair market value is the price at which the property would change hands between a willing STARTING AND GROWING YOUR BUSINESS 22 CHAPTER 9 Succession Planning If the business owner does not plan in advance how his interest passes upon sale or death, he is missing an opportunity and, worse yet, may be creating a terrible mess to be sorted out by his estate, the business and perhaps the courts. Below are some techniques used to provide structure to what otherwise may be turbulent situations. Buy/Sell Agreements All closely-held businesses should have a formal plan to ensure the preservation of the business upon an owner's death. A buy/sell agreement is an agreement among owners of a company regarding issues such as the sale of the business in the event of the death, disability or divorce of an owner, and the proper value of the business if one owner wishes to sell their interest in the company to another. For many business owners, the value of their business interests is by far their largest asset. Since this asset is often times illiquid, a premature death or disability might prove disastrous. For example, the deceased owner's estate, depending upon its value and the exemption levels at date of death, may need to pay a substantial federal and state estate tax within nine months of the owner's death. These tax rates can be in the range of 55%. If there is insufficient cash to pay the tax, the estate will need to either sell the deceased owner's interest in the business at a steeply discounted price, or pay the tax late with substantial penalties and interest. Tax issues aside, without planning, an owner's unexpected death may create a situation where the remaining owner is now a business partner with the deceased owner's surviving spouse or children who may have had little or no previous involvement in the business. A fundamental component of any buy/sell agreement is a mechanism to >>> Continuted on next page buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts" (emphasis supplied). If the value of an interest is zero at inception, one interpretation of the willing buyer test would posit the gift tax value is zero, or close thereto. Therefore, having a trust for the benefit of the children be an equity holder at inception, as to 25%, 50 %, or some other fraction, has minimal gift tax concerns, and has substantial equity upside. Now consider use of a credit shelter trust so that the upside can be enjoyed by the grantor while still avoiding nasty estate tax results (recall the 55% taxes noted above). It is safest to use a nonbeneficiary Independent Trustee to be certain the property will be excluded from both spouses' estates, while still allowing access to the funds if need be. STARTING AND GROWING YOUR BUSINESS Further, in a straight gifting situation in which the grantor gifts property equal to or in excess of the exemption equivalent ($5,120,000 per decedent in 2012, but scheduled to decrease to $1,000,000 in 2013), a gift to a grantor trust is preferable to a gift outright. If the gift is of appreciated assets, the donees will realize the capital gain in the future when the assets are sold. However, if the gift is to a grantor trust in which the grantor retains no interest other than that necessary to make it a grantor trust, then future capital gains will be paid by the grantor instead of the trust. In addition, ordinary income and other taxable income incurred annually can be allocable to the grantor of the trust. This has the effect of increasing the estate-taxfree property in the hands of the donees while decreasing the estate-includible property in the hands of the donor. 23 CHAPTER 9 Continuted from page 23 provide for the disposition of an owner's business interest upon death. A common method for a two partner business would be to purchase life insurance (on each other's life) in a "cross-purchase" arrangement, with a death benefit equal to at least the value of each owner's interest in the business. With this type of arrangement, each owner is contractually obligated to purchase from the deceased owner's estate the deceased owner's interest in the business. A "redemption agreement" is preferable to the cross-purchase agreement in a business of three or more owners. In this agreement, the business entity (the corporation, LLC, etc.) is the owner of the insurance policies insuring the lives of each owner. Upon the death of an owner, the entity uses the life insurance on the deceased owner's life to purchase from his or her estate the deceased owner's business interest. A third alternative is a hybrid or "wait and see" approach where the entity has the first option to purchase a deceased shareholder's stock. If the corporation does not exercise the option, then the remaining owners will have the option to purchase the deceased owner's interest. If the remaining owners do not exercise their option, typically the corporation will be required to purchase the interest. coverage. The same broker may be able to assist you with setting up a benefits program for your office staff. You won't have trouble finding an insurance rep happy to meet with you and offer you coverage options. Exit Strategies At some point, your business may have "real" value, and perhaps you're able to find a willing buyer or would like to transfer ownership to your children. Here are a few ideas to discuss with your counsel that may help you avoid losing your hard earned gains. Grantor Retained Annuity Trusts ("GRATs") The creation of a GRAT, when used properly, can transfer part or all of an owner's business to the next generation, and, more importantly, in a way that does not subject the transfer to estate Insurance There are numerous articles, chapters and books that have been dedicated to insurance coverage, types of insurance, whether you need it and how much is enough. In addition to the life insurance outlined above, the business owner would be wise to meet with a knowledgeable insurance broker to discuss: (a) liability coverage (professional, personal and property); (b) a personal umbrella policy; and, depending upon other assets, (c) long-term disability and gift taxation. A GRAT with a business interest is created when a grantor transfers a portion of his or her interest into an irrevocable trust while retaining the right to an annuity interest, "a qualified interest", for a fixed term of years. When the fixed term of years ends, any assets remaining in the trust pass to the remainder beneficiaries initially named by the grantor. In order to achieve the greatest gift tax efficiency, the value of the qualified interest must equal the value of what was transferred. Therefore, the business interest must be valued and the planner must do an actuarial calculation that sets the annuity amount multiplied by the term of years, at the required interest rate, equal to the valuation. Example 1: Grantor G transfers a 10% interest in his S corporation, valued at $1,000,000, to a GRAT. Under STARTING AND GROWING YOUR BUSINESS 24 CHAPTER 9 and accompanying regulations. The sale to a grantor trust, in contrast, is not governed by these types of stringent requirements. Pre-Sale Charitable Remainder Trust This is another technique designed to take advantage of the valuation discounts available before a sale of business. The key features of this technique include (a) an irrevocable transfer of assets to a charitable remainder trust; (b) the Donor retains an income interest for a fixed term of years or life; (c) assets pass to charity at end of trust term; and (d) the Donor receives a current income tax deduction based on the fair market value of the assets contributed. Some key benefits of this technique include (a) assets transferred to the trust can be sold without incurring income tax ; (b) the Donor can receive income for life; and (c) assets and appreciation are not subject to estate tax at the Donor's death. the terms of the trust, G retains the right to $261,350, payable annually, for a period of 4 years. Any value remaining beyond the fourth annual annuity payment, if any, will pass to G's children. The gift tax value of the transfer is $0.32, calculated assuming a section 7520 rate of 1.8%. All income and appreciation in excess of the required annuity accumulates for the benefit of the remainder beneficiaries; generally the business owner's children. Consequently, it may be possible to transfer assets to the beneficiaries when the retained interest period terminates with values that far exceed their original values when transferred into the trust and, more importantly, that far exceed the gift tax value of the transferred assets. In zeroed-out GRATs, the gift tax value is near zero, so any amount that remains after the retained interest term has effectively been transferred gift tax free. In the world of estate planning, for those S corporations that generate sufficient cash flow, the GRAT will be the strategy of choice to transfer value down to the next generation without incurring any estate or gift tax costs. STARTING AND GROWING YOUR BUSINESS Example 2: Same facts as Example 1 above, but at the end of the 4-year GRAT term, the S corporation is worth $3,000,000. The value in excess of the required annuity ($261,350 in our example) would pass to the children free of gift and estate taxes. Conclusion Failing to plan is a planning to fail. Regardless of what stage of life and career you find yourself in, great attention should be paid as to how your affairs are structured; both personally and professionally. Experienced counsel should advise you on your different options based upon your particular goals. As a general rule, your core estate planning documents should be in place and upto-date before venturing into the more complex strategies outlined above. Brian K. Jones Brian is Partner at Harrison & Held, LLP. His practice is centered on estate planning and administration, which includes business succession planning. He has attained an AV Peer Review Rating from Martindale-Hubbell, the highest rating attainable for ethical standards and legal ability, and for the past two years has been recognized by Super Lawyer and Chicago magazine as an Illinois Rising Star. He can be reached at firstname.lastname@example.org Sale to an Intentionally Defective Grantor Trusts Consider the sale of a closely held company, or the possible IPO of that same company. Prior to the sale, the value is $X. Typically, an exit strategy will result in the value going to 2 times the original value. The estate planner's goal is to consider the appropriate format to take advantage of this increase. Generally speaking, the sale-to-agrantor trust achieves the same objectives of a GRAT in transferring the appreciation and rate of return in excess of the used discount rate, for valuation purposes, to the remainder beneficiaries. The tremendous flexibility in structuring a sale to a grantor trust differentiates it from a GRAT. A GRAT must follow the strict structuring and payment regime set forth in the Code 25 Networking for Lawyers Why won't sharks attack lawyers? Professional courtesy. Every new lawyer has heard jokes demeaning the legal profession. These attacks revolve around confusing explanations of the law, inability to reach your lawyer by phone, and the ever-notorious billable hour. Why do lawyers not share the same societal respect achieved by medical and religious professionals? Doctors are highly regarded as scrupulous stewards of their patients. Clergy of all faiths are renowned for their commitment to confidentiality and service to their parishioners. Lawyers share the same duty of confidentiality and trust; we all are bound to a higher standard of care. The legal profession as a community needs to promote a discussion regarding how we can reform and uphold the integrity of our craft. Sir Philip Sydney, famous sixteenth century poet, depicted the intricacies of the legal profession: "Laws are not made like lime-twigs or nets, to catch everything that toucheth them; but rather like sea-marks, to guide from shipwreck the ignorant passenger." Great lawyers, regardless of their breadth of experience, must: 1. Build a legal reputation; 2. Hone their presentation skills; 3. Effectively manage their time; and 4. Make money and pay the bills. Active, engaging, assertive networking can propel an attorney's career by expanding a client base and building a credible reputation. Whom Do You Want to Meet? Building a Legal Reputation. When I first started my practice, I focused on getting paid. In order to do so, I only met with direct clients who needed my services immediately. I failed to see the need of connecting with other attorneys, thinking they would steal my business. I saw no reason to connect with other colleagues, past clients, or competing attorneys. Unfortunately, that attitude prevented me from building a solid networking foundation or from learning from my colleagues and competitors. Ancillary Colleagues I am a small business attorney with an intellectual property background. Accountants may never hire me directly, but they are my top source of business referrals. When I incorporate businesses, I need an accountant to explain the multifarious tax implications to my clients. Similarly, accountants need an effective attorney to assist their business clients with common legal pitfalls. Developing power partnerships with ancillary services expands your own sales force. Who can assist you in finding clients? Are event planners helpful in making introductions at corporate events? Do website designers have special relationships with desirable technology companies? Learn who the power partners are for your potential clients. By offering to make introductions within the industry, you add value to your own portfolio. Attorneys within Alternate Practices I continuously develop partnerships with attorneys in other areas of law to pass referrals. Most laypeople do not understand the need or reason for specialization among attorneys. I receive calls daily asking for help writing a trust, assistance with a criminal matter, or what to do after receiving a personal injury. Cultivating relationships with attorneys in other practice areas builds my own reputation as a connector. It also enhances my value as a referral partner for these attorneys, and they reciprocate. Attorneys within Similar Practices Additionally, attorneys within my own field help me to hone my own practice. Connecting with an attorney who has practiced your particular area of law for forty years lends insight into how to improve your technique. Experienced attorneys are typically financially successful, and may be another source of solid refer- M ASON C OLE , C OLE S ADKIN , LLC rals (when they don't have time for the new client). We have all wanted to compare notes and bounce ideas with an attorney in our field. By developing sincere relationships, you develop a reputation as a team player. Competing Attorneys Finally, make friends with your direct competitors. Benjamin Franklin expounded upon how to change a competitor's judgment: "How do you change someone's opinion of you? Ask them to do you a favor." When we do a person a favor, we like them more as a result. A positive relationship leads to amicable results for clients on both sides of the aisle. The legal world is comically small. One day you will need an extension on your discovery deadlines, help contacting a court clerk, or assistance with smoothing over a disgruntled judge. Take advantage of opportunities to build bridges with colleagues. Selfish Selflessness--Benefits of Helping Others Most importantly, prioritize helping your colleagues over helping yourself. Does your small business client need an accountant for tax season? Does your personal injury plaintiff need an experienced chiropractor for her back injury? Assisting your colleagues is the easiest and most efficient way to build your reputation. Well-respected lawyers receive well-respected paychecks. As standard practice, I recommend providing two referrals for every colleague you encounter. This may initially appear to be a daunting task, but consider how many colleagues and the variety of industries you encounter in a given week. Ask your colleagues how they obtain clients and who is their preferred referral source. Learn about the struggles within their industry. Directly inquire how you can assist with introductions in your network. Most importantly: follow through. Become a benefit to clients' STARTING AND GROWING YOUR BUSINESS 26 CHAPTER 10 occupations and enhance your value as a needed resource. Confidence Breeds Success: Presentation Skills for Lawyers Confidence and honesty creates a stronger bond of client trust than a wellresearched treatise ever will, so be sure to focus on presentation. Whether presenting to a large group or introducing yourself to a single stranger, look your audience directly in the eye. Hold their gaze and smile. You want your audience to feel warm and welcome. When someone walks into the room, do not be tempted to shift your focus. Your listener needs to believe he or she has earned your time. Most important, of course, is the initial handshake. We have all encountered a weak handshake, or, even worse, the bone crushing hold. Both convey a lack of confidence and immediately alter our opinion of the person connected to that shake. Judie Knoerle of Red Cup Presentations is a renowned public speaker and Chicago presentation coach. Knoerle clarifies the most common mistakes she witnesses among uncomfortable speakers: Most presenters are completely unaware of their gestures, body language, voice projection, or eye contact and don't consider how those elements either interfere or enhance their message. An effective presentation is well prepared, well choreographed, and well rehearsed. You must maintain open body language and make good solid eye contact around the room. If speaking to only one person, look them in the eye, project your voice, and smile. Remember, people like doing business with people with whom they feel comfortable. Attorneys frequently are so concerned with the content of their presentation that they forget to hone their delivery. Speaking quickly does not equate to speaking succinctly. Prime Minister Winston Churchill is famous for meticulously practicing and memorizing his World War II speeches. Churchill understood that the British population craved confidence. He took great care to manage the STARTING AND GROWING YOUR BUSINESS message's presentation as much as it's subject matter. President Lincoln once claimed that it is "better to remain silent and be thought a fool than to speak and remove all doubt." Our sixteenth president clearly did not charge on an hourly basis. Managing Your Time The average lawyer bills between 1800-2200 hours per year. Some lawyers bill less hours and earn large salaries. Some bill more and can barely keep food on the table. You cannot invent more hours in the week. But you can step back from the pressing phone calls and mountain of paper to consciously assess your efficiency. Time management separates mediocre lawyers from fantastic lawyers. Individual, personal referrals will always be your primary source of business. Attentive, caring client interaction will be remembered. In a potential client's eyes, you are only as good as your last case. Make sure you take the time necessary to scrutinize the details, prioritize your client, and build respect with opposing counsel. It is tempting to lose the forest for the trees, to dive into each matter immediately upon receipt. But handling every phone call or email the moment our smart phone beeps or blinks does not necessarily lead to more productivity. I recommend itemizing and prioritizing client tasks and priorities on a weekly or even daily basis if possible. Certain requirements, especially court deadlines, must be chronicled and completed. By maintaining a bird's eye view of your practice, you remain in control of your own agenda. Making Money Jay Foonberg wrote an excellent handson tutorial for managing a client's expectations and cultivating a client base, aptly titled How to Build and Expand a Successful Law Practice. Foonberg, a widely successful attorney and writer with a California practice, explains foundational tenets that remain relevant to all attorneys regardless of practice type or tenure. Many attorneys feel pressure to drive down prices to retain clients and remain marketplace competitive. Be wary of a client's lowered expectations accompanying reduced prices. Clients subconsciously place a financial value on your services, and when you offer a discount, clients reduce their perceived value of your work, as opposed to appreciating your generosity. Further, when billing a client, be sure to itemize and clarify each iota of work so that the client knows the fastidious and extensive nature of your work. If you performed $10,000 worth of work but charged only $5,000, be sure your client knows the amount of effort you extended. One frequent source of lawyer anxiety is determining when to provide discounts to colleagues, friends, and clients. In my opinion, discounts are never considered a "quick favor" or "one-time opportunity." On the contrary, discounts denigrate the perceived value of your time and effort. If you believe that lowering your prices may bring clients in the door (the "Groupon mentality"), then consider it a viable option. However, I find that prompt, honest, (and) quality service always trumps lower prices. Applying Networking Practices You have control over your reputation and the reputation of the profession. Money follows integrity. Always be conscious of how you can be an asset to your clients and colleagues. Mason Cole Mason is the managing partner of Cole Sadkin, LLC. Prior to Cole Sadkin, he extrerned for United States Magistrate Judge Diane K. Vescovo at the United States District Court for the Western District of Tennessee. He then worked for the lobbying arm of the BT Group, impacting passage of President Obama's National Broadband Plan. He has lectured at Loyola University and is a frequent writer and speaker. The firm's practice focuses on small business incorporation, labor law, intellectual property, and commercial and residential real estate. He can be reached at email@example.com 27 Online Marketing and Web Presence 10 Steps to Creating an Effective Online Marketing Campaign An online marketing campaign doesn't just promote your web site and business, it helps you to cultivate relationships, demonstrate your expertise and build your reputation. If you are able to commit the time to nurture your web presence, you can increase web traffic and sales without financing an expensive advertising campaign by following these 10 steps. 1. Define Your Audience: Like any other marketing initiative, it's imperative to define your audience before launching an online marketing plan. As you start identifying your audience, think of the individuals or companies you want to buy your products or services, along with the people and groups who help facilitate those transactions and relationships. Consider demographics such as income, geographic location and education that may further define your audience, along with lifestyle attributes like values, hobbies and interests. Also, check out your competition's web sites to identify their targeted audience, and note any groups they ignore. You may find that the audiences overlooked by your competition could be your perfect niche. And remember that you can't be everything to everyone. Once you start to define your audience, confirm the group is neither too broad nor too narrow and make sure they are accessible online. 2. Identify Keywords: Once your audience is defined, consider their concerns and challenges and think about the words they would use to describe your products or services. These are the words your potential customers will enter in search engines to find businesses like yours. Make sure to incorporate those keywords in your web site pages, especially in page titles, headings, first paragraphs and meta-tags. The inclusion of keywords will assist search engines to find your site and rank it higher when potential clients conduct a search. 3. Select a Memorable Domain Name: While many domain names have already been registered, this just means a little more creativity is required in the selection process. You need a name that is simple, short and easily remembered. If your firm name is long, consider using only the first one or two names or an acronym that is easy to say, spell and type. If your name is common and already registered, consider a name that is more concept-based using the keywords you identified. While there are many options from .com to .info to .biz, it's best to select a .com suffix as the general public correlates .com first and foremost with the Internet and you can expect it to be used in searches for your site. Whatever name you select, run it by some trusted colleagues and clients for their input. After securing your .com domain name, you may also want to register the name with other suffixes (.net, .info, etc) to ensure no one can register those domains. 4. Avoid Unnecessary Delays: Too often, business owners think all the bells and whistles are necessary when designing a web site or expect every page to be absolutely perfect. While an elaborate web site can seem impressive, its development can take a great deal of time, delaying your online marketing efforts and related financial gains. When launching your web site, your focus should be on the content and you can always improve the design at a later date. 5. Focus on Content: As you develop web site content, think about the answers and solutions your customers seek to address the challenges they face. Make sure your content addresses these issues, instead of concentrating on sales alone. In fact, you may want to give A MY M ASTERS , AM C REATIVE , LLC away some information that makes you stand out from the competition. Consider writing an eBook on an industry topic that your customers can download for free in exchange for user contact information. In addition to growing your contact list, giving away useful information to potential customers will help demonstrate your expertise, instill greater trust and encourage repeat site visits and sales of products and services down the road. 6. Incorporate Web Information in Emails: It's surprising how often friends and family can forget what it is you do, resulting in lost referral opportunities. A simple but sometimes overlooked way to promote your company and web site is through your email interactions. Once your domain name is established, trade in your Gmail, Hotmail or other webmail service account for an email address with your domain name. Not only is this more professional, it's a continuous reminder to those you email about your web site and business. And when you inform your network about the address change, it's another promotional opportunity for your business. Also don't forget to create an email signature including your company name, web site, contact information and social media links that is auto-inserted in all your emails. 7. Start a Blog: Add a blog to your web site to show off your knowledge and expertise in your field. You can write short articles about successful projects your company led, challenges your customers face, and solutions your company implemented. Ask your employees and even clients to contribute to content ideas and writing. Make sure to post regular updates to your blog, even if it's only once a week. And don't stop there. Inquire if other associations you are a member of have blogs and newsletters and would like guest submissions. Make sure your name, comSTARTING AND GROWING YOUR BUSINESS 28 CHAPTER 11 pany and web site link are included with each published article. Also seek out other blogs that cover similar topics where you can join the conversation and build relationships by sharing your knowledge in reader comments. Not only will these posts and communications help to demonstrate your authority and build your reputation, establishing external web site links back to your site will improve search engine optimization and will move your site higher in page ranking. 8. Start an Email Marketing Campaign: Before you can begin an email marketing campaign, you need an email contact list. Start with your Outlook contacts and business card collection. You may also have access to email lists of persons in your target audience through member associations or previous projects in which you participated. After you create your contact list, you'll want to establish a system to regularly update the list as you build your network and acquire new clients. Next, sign up for an online email marketing software program like MailChimp or Constant Contact. Software is free or low-cost while your contact list is small and the subscription rate will increase as your contact list grows. Your first contact with your list and all subsequent new members should be a welcome email providing information about your business, outlining newsletter content, and noting how often emails will be sent. Remember that your content should focus on providing information and solutions to customers. Encourage your contacts to share your email with others, and also make sure to include an opt-out link. Keep in mind your audience has a short attention span; articles should be relatively brief, calls to action should be clear and links to your web site should be easily accessed. After each email is sent, review software reports to learn how often emails were opened and forwarded, links were clicked, and persons opted-out to determine the effectiveness of your newsletter. Continually review these reports every time you send STARTING AND GROWING YOUR BUSINESS an email. Evaluate what is effective and what isn't and implement changes accordingly in future emails. 9. Engage Your Audience through Social Media: Social media offers small business owners a unique platform to build relationships and trust with your target audience without requiring a large advertising budget. If you're willing to commit the necessary time, social media allows you to directly access your potential customers, establish your expertise and build your reputation � ultimately driving customers to your web site and increasing sales. While there are a number of social media channels available, LinkedIn, Twitter and Facebook all provide you with excellent opportunities to engage your audience. LinkedIn: LinkedIn provides a format for users to showcase their education and work experience and build a professional network. When creating your LinkedIn profile, make sure to complete all sections, including biographical summary, specialties, education, work experience, resume and web site. You should also make your profile public and customize the public profile URL with your name to improve your ranking in online searches. Work on building your reputation by posting recommendations about the work of your colleagues and ask others to do the same for you. Groups allow you to connect directly with your target audience and share content and feedback, allowing you to establish your expertise. Identify groups that attract members of your target audience and join the conversation. Twitter: Twitter is an excellent platform to share news, information and resources. You can build your targeted audience of followers while also following and learning from leaders and experts in your field and beyond. Use the search feature to identify and follow people who work in the same industry or share the same interests. The search feature is also effective in identifying conversations related to your field providing you with opportunities to offer advice and solutions. You'll find that when you start participating in the conversation � re-tweeting others' posts of relevance to your followers, sharing links to useful content, responding to tweets, and acknowledging re-tweets and follows � that your followers will grow. Twitter limits your posts to 140 characters, and you'll want to make your posts even shorter when possible to encourage others to re-tweet them. Facebook: With Facebook business pages, you have the opportunity to add a little more fun and personality to the social media mix. In addition to posting images, videos and links to engage your fans, ask questions, conduct surveys and even run silly contests. Encourage users to interact with your page, such as liking or commenting on a post, answering questions, or adding their own posts. Make sure that your content is always interesting and fresh, including content that isn't always directly related to your business. 10. Track Your Results: The only way to know your online marketing strategy is working is to regularly review web site metrics. You can use free web software, like Google Analytics, to measure sales and conversions, learn how visitors use your site, and identify web sites that drive customers your way. Review key information like page visits, top landing pages, top referring sites and bounce rates to determine the effectiveness of your web site, individual web pages, and social media campaigns. Just like your email marketing campaigns, continually review statistics to evaluate what is working and what isn't and make changes as necessary to improve your site content. Amy Masters Amy is a seasoned communications strategist with 20 years of experience in the public, private and not-for-profit sectors, Amy established AM Creative, a graphic design and marketing firm in 2002, utilizing her communication and public affairs skills to serve political candidates, organizations, non-for-profit groups and small businesses. She can be reached at amy@ am-creative.com 29 Growing Your Practice Through Referrals CHAPTER 12 J AMES E. T HOMPSON , JD, M IDWEST C ONSULTING G ROUP, I NC . I was originally going to write an article on growing your practice through referrals, but a conversation with a young lawyer looking for employment changed my mind. He had been seeking employment for almost a year and he wanted my thoughts on starting his own firm and how he could go about getting clients. As I was talking with him about growing his practice through referrals, he said to me: "That's great, but I really don't know anyone that could refer me". That statement stopped me in my tracks and I set about sharing with him just where he could find people that could refer him and what he needed to do to build his referral base. Before I go any further, let me say from the start that there is NO magic bullet I can share with you. It is going to take work on your part, but if you want to grow your practice, you are going to have to work at it. The first thing I told him was that he needed to tell everyone he knew that he was a lawyer and he was starting his practice. This included all of his relatives, friends, high school and college classmates as well as his Law School classmates (Law School classmates needed to be reminded as they might be in a position to refer clients to him). I talked to him about ways he could do this but since space is limited here, I will simply say that if you would like some hints email me at the address below and I would be glad to share some of these ways with you. We then talked about NETWORKING. I saw from the expression on his face that he had heard about NETWORKING but his expression confirmed this was not for him. Probably many of you reading this have a negative reaction or feeling about NETWORKING and this is because you truly do not understand what NETWORKING really is and more importantly what it is not. What NETWORKING is not! There was a time that networking was about entering a large crowded room of people you did not know, all dressed in stuffy business attire and your goal was to walk away with as many business cards as possible, exchanging them frantically and saying something like: "Let's do lunch" as you went on to the next person to give and get a card and say the same thing. Then you were supposed to follow up and close the deal in this case get a new client. Quite frankly, as I wrote that, NETWORKING sounded pretty horrible, sleazy and not a way I would want to spend 2 plus hours, but NETWORKING has changed. Today, NETWORKING is all about building relationships and the rest of this Article will be devoted to relationship building. Again, because of length I will just be scratching the surface but it is my hope that you will start to see how important the building of relationships is to getting clients. I attend quite a number of network- ing events each week and invariably there will only be one or maybe two Lawyers there, if that. Since there are so few Lawyers attending these events, if you want to jump way ahead of other Lawyers this is a great way to do it and you can do it quite inexpensively. After all, many young lawyers I know are short on cash but have a lot of time on their hands, so now is the time to make that extra time pay off. While this may seem rudimentary, the first thing I want you to do is to get yourself some very professional business cards. Spend some extra money on these because this is a representation of you and how you see yourself. While you might not be successful yet, you can at least look the part. Next you need to think about the Networking events you will attend. There are so many events these days but, to be honest, the events you will attend or that will work for you will most likely be found by trial and error. My rule of thumb is to go to an event at least twice before you decide whether to STARTING AND GROWING YOUR BUSINESS 30 CHAPTER 12 keep going back. As you do more and more events you will get a feel as to what is right for you. The key here is to go to as many events as possible to get the feel for what you are looking for. Now, speaking of what you are looking for, when I am talking with attorneys who have been in practice for a while they have an idea of the type of client they should be looking for � notice I said should be � but many just take any client that comes along. I could write another Article on that, but that is for another day. When you go to a Networking event you need to be able to give a 15-30 second "audio logo". This used to be called an elevator speech, but you need to think of this as your "audio logo". You need to be able to tell a group what it is you do and the type of client you are looking for. I know, being new you may not know the type of client so, for now, simply say something like: "I just opened my new Law Office and I am looking for people who need legal help." I do not like this and the sooner STARTING AND GROWING YOUR BUSINESS you can be more specific the better, but this will have to do if you are not sure of the type of client you are looking for. If you do have a particular area of practice right now send me an email and I will give you some thoughts on what you can say. Another Rule I want you to remember is the 80/20 rule: let the person you are talking with talk 80% of the time. You will learn a lot about the person you are talking with and, quite frankly, people like to talk about themselves. So let them do the talking. As lawyers you should be good at asking questions, but here are two questions I like to ask: Where are you from originally? (you will be surprised at how many times there is some connection there) and what do you like to do when you are not working on your business? (again many times you will find common ground which you can talk about). I like to call these "feel good questions" because they make for light conversation and, when a person is talking about themselves, it makes them feel good. There are many other questions I like to ask and if you would like more information on this please send me an email. After you have talked with someone, ask them for a card, do not give them your card unless they ask for it. So the event comes to an end and when you get home you have say 10 cards, now comes the real work, the FOLLOW-UP. This is perhaps the most important phase of NETWORKING and quite frankly the one most often neglected. Follow up with a hand written note. Notice, I said a hand written note. Again I do not have the space to explain the importance of this but send me an email and I will let you in on a little known secret that will have you standing out. If you don't know what to say, simply say: "It was a pleasure meeting you and I look forward to seeing you again soon." Very simple, but not many people do this so if you do this you will be way ahead of other Lawyers. In the limited space I have had I hope that it was enough to whet your appetite for learning how to NETWORK and start to build your REFERRAL base. Before I conclude I would like to recommend what I believe is one of the best books on Networking and getting Referrals and that is Bob Burg's "Endless Referrals." This costs about $13.00 from Amazon and it could be the best investment you could make in building your practice. James E. (Jim) Thompson Jim is a retired attorney and President of Lawyers Marketing Resource. At Lawyers Marketing their mission to help lawyers and other professionals get more clients and grow their practice by teaching them how to use "Relationship Marketing." His programs use the EAA method. EDUCATION, ACTION and ACCOUNTABILITY. He can be reached at jet@LawyersMarketingRe source.com. 31