Updated: Jan 12, 2020
Loved ones are often the reason we work so hard. So it is extremely important that you make sure that your loved ones are cared for. If something ever were to happen to you, you need to preserve the resources you have for their benefit. Learn what you need to do to prepare your assets. If anything were to happen to you. Tune into this week's episode of stand out and grow to learn more. I'm Kat Ramirez, your host of stand out and grow. I want to help your business stand out, survive, succeed and grow. building your business is really really hard. And knowing what marketing and advertising tools you need to help you become successful is extremely confusing after 30 years of working with thousands of businesses. I am here to help you make good business decisions. I want to help you understand the programs that are available to you so that you can stand out, survive, succeed and grow. So let's get started. This is episode nine of stand out and grow gacha today I want to introduce you to someone who helps people and business owners protect their assets. our loved ones are often the reason we work so hard. So it is extremely important day you make sure that your loved ones are cared for if something happens to you, and you preserve the resources you have for their benefit. Please join me in welcoming Gifford Collins CEO of Collins, a law firm.
My guest has studied international business in Belgium. Learn to speak French. He spent time in England and Spain and 2004 he had the good fortune to travel around the world through Europe, Asia and Australia. And he studied international law at the University of Toronto and in Canada, and the East China School of politics and law in shy Hey, welcome gift. How are you? How are you today? Awesome, awesome. We are so excited to have you as our guest today on the stand out and grow show. And so I gotta read this statement that I found that I read on your bio, and I just want to read it out loud because I loved it. And I think it really lays the land for our conversation today to any business owner that is listening right now. Okay, okay. Imagine that you travel out to a piece of land and begin to build without any plans. You have no architectural guidelines or construction blueprints. It would seem unwise, wouldn't it? And yet in my profession, I encountered this type of thinking related to state estate planning on a daily basis. Can you elaborate a little bit on this because I love this it really does lay the kind of the groundwork that I can envision that.
Yeah, so you know, what I'll run into is people are always concerned about their state plan. You know, what will happen to them if they become incapacitated or if they were passed away suddenly. And you know, they will have done a little bit here a little bit there sometimes or sometimes nothing at all. They might have some powers of attorney in place. They may have a loved one as a power of attorney on one bank account but not another. They may have actually created a trust with an attorney but they didn't take the next step of actually transferring any assets into that trust. So, you know, they'll they'll come to me and a lot of times they'll think that they do have an effective estate plan in place and once we look closer at it, it ends up not being an effective estate plan for them or they have something in place it doesn't really put together everything if they'd like to happen if something were to happen to them.
So So if so let me see if I'm clear here. So when you are a lot of times when you meet these people, they have bits and pieces of what they should have, but not anything that's like really clear and concise.
Right and it might not work exactly as they like it. Maybe they found you know a do it yourself will kit or do it yourself trust kit online. And when they filled it out, they thought they filled it out in a way that would essentially give them what they want. But, you know, when you take a closer look at some of the provisions of those trusts or wills,
you know, it could be a different result for them. Gotcha.
Okay. So just so that my audience knows why we're talking to you today. I'm just going to recap here so that we can kind of lay the groundwork because there's three main focus of what we're going to talk about one, Business Law, so things that you can do to help businesses with their the different things that they run into, and we'll go through that, okay. And you'll walk us through the different pieces of why someone should hire an attorney to go through some of the things that you manage for them. Okay. The second thing is a trust. I know for a fact when I talked to on entrepreneurs, it's not something that's talked about. And I know that I work with some clients that find themselves in situations because they didn't have anything in place, whether it be the trust, or the final thing, the wheel that wasn't in place. So let's just go right into the business law. So for a business entrepreneur, you know, what are the different things that you can help a business owner with? So in case they don't know, you know, this is what you should call an attorney for to help handle this for you.
Yeah, so it's kind of a cliche, but one of the ways to explain it is, you know, you want to start with the end in mind. So, a lot of business owners, they get stuck doing the business work without thinking about, you know, how what is a business doing for them. They they're doing The day to day work without actually having a plan about how to transfer the value that business to the loved ones, if something were to happen to them. So by coming to an attorney, those are those are some of the things that that we can do to set up a system that will transfer that value from the individual, small business owner, to their family. Because small business owners, you know, we know that most of the value is wrapped up into that owner, they know how the business works, they have all the business contacts. And if they weren't around, their business wouldn't be worth nearly what it would be with them there. So some of the tools that we use are different agreements. Either between, you know, the owner and other owners, or the owner and employees sometimes there Third Party purchasers that are involved. But for example, if your small business owner and you have someone that you feel you would like to take over the business, it could be a family member, it could be a key employee, or it could just be a competitor, who might want to purchase a business. If it's a family member, the things that we would do is, you know, how do we equalize the inheritance? So if one of the kids is going to receive the business, how do we, you know, compensate or given inheritance to the other kids who aren't involved with the business? So a lot of times that will involve the business valuation, and that raises its own questions because how, you know, what's, what's the value of the business? If it's a key employee will want to have some sort of buy sell agreement, or I can play agreement that would dictate When that key employee could purchase the business, either from the owner themselves or from the owners, family members, if something were to happen to that owner. And that often involves, you know, an insurance policy on the business owner that if they die, that death benefit will give cash to that key employee that the key employee can then use to purchase the business from, you know, the family members that that survive that business owner. And then with a competitor. You know, there's a lot of different ways that we can set up a deal where a competitor could come in and essentially just purchase the business or if it's over time, doing a percentage of sales and those kind of things. So for small business owners, taking these steps is extremely important because a lot of times if you do it right, it could be a five year process. And I strongly encourage my clients to do that. Because all of these things that you're doing to prepare for an exit plan, or to prepare for business succession, these are all going to be great exercises to help your business be more efficient while you're alive.
Right. All right. So So what you're saying is, if you're a business owner, you should have a succession plan, period, no matter what, whether it's going to go to an employee family, or in case of death or something.
Yes, yes, definitely. And, you know, some of the things that we do, you know, we'll take it the policy, look at the policies and procedures will see if the owner were to, you know, take a couple of weeks off or, you know, if they were to become disabled, with the business be able to continue would someone be able to come in and look at those Like the employee handbook or other documents in the business and continue the business without the owner being there because having those type of policies and procedures in place adds a ton of value to the business. it transfers Yeah, it transfers that value from the owner into the business itself. So those are you know, some of the things that we look at.
Okay, so I'm just going to explain a situation that that I not me personally but one of my clients had and you if you can tell me what a resolution would have been okay.
So this shot
Okay, I know you got this calf.
So I had a client who was verbally promise the business including like all the what is it the equipment and you know, furniture and everything. thing. And what happened was that and this was a long conversation, I wouldn't say like five years. And what happened was that person instead of selling it, or as he he agreed to pass it on to the employee, he just liquidated everything. Like is was there a way for that employee to somehow protect herself?
Well, I mean, the first thing that we get it in writing for sure.
You know, and
so, yes, okay.
Whether she prompted him to Let's go see an attorney. You know, I mean, like she could have did that.
Oh, yeah, definitely. I with that, I mean, we look at it that could be a can play situation and you know, again, those those team play agree mistaken. You touched on a great point. Those are You know, what your friend was experiencing was the opportunity to purchase a business that they already knew. Right? And that's valuable to them, but the person that was selling the business may not have had a whole lot of confidence that there was enough money that the employee could pay them for the equipment. You know, whether that key employee could continue to business in a way where the owner could continue to receive a percentage of the revenue. For example, if, if your friend, you know, I was going to receive the equipment as a result of a sale, the business and the financing arrangement was, you know, 20% of what the revenue for the business was over a year. Maybe that previous owner was worried that the business wouldn't continue in a profitable manner as That they wouldn't get their money. So what you could do, you know, and I don't I don't know what the situation was, but there, you know, there's 100 different situations that could arise there. Yeah. Which is why it's important to speak with an attorney because, you know, attorneys. A lot of times for business owners and employees, this is the first time that they've had to deal with something like that. Right, right. An attorney that works in business succession will have seen a lot of different scenarios already. And can account for those in a properly drafted buy, sell agreement, and make suggestions about how to finance, how to finance at purchase, whether it's through like I mentioned before the life insurance policy, or maybe it's just a commercial loan from a bank. You know, there are a lot of different ways that you can finance these deals, and in ways that will be beneficial for both parties.
Right. Right. Know that total sense. Okay. So I have a lot of examples because I want anybody who is listening to kind of like relate or identify themselves with some of these situations. And I feel like some of the things that I run into when I work with clients are not an anomaly. You know what I mean? Like they're not
Yeah, yeah, you you'll run into scenarios that happen over and over again, right times people will feel like, you know, there are unique situations, of course, and each feels different. And really, that's kind of also related to the individuals involved. I mean, everyone's different. Yeah, I, you know, in in the family situation, where there's a small business. Each one of the children and the parents attitudes towards money and those kind of things can be allowed to Right, right. Right. And maybe the parents are savers and the kids are spenders. And you know, so those are all things that you can understand in trying to structure a deal for for business succession. So
let's talk about that for a moment because I do run into clients who are passing their company down to the next generation. So they're, you know, sons, daughters, brother, daughter in law, you know what I mean? Son in law, whatever. Yeah. So, should there be a formal way to do that? Or do they just pass it down and say, now they're in charge? I mean, is there a process to protect them?
Yes, and yes. And that's what I was alluding to before was, you know, it can be you know, if you do it correctly, depending on the size of the business, it could be five years of preparation. So if you have a family member, maybe they are fresh out of college, or they've been in business for a couple of years, and they're very good in one specific part of the business, but they wouldn't necessarily be capable of running the entire business on their own. You can go through exercises and of course I don't do this all on my own right. There's other business coaches and turnaround specialists, if necessary, who have resources to teach, or at least identify strengths and weaknesses of these potential business owners. Yep, to determine where they they could use some extra help. You know, maybe it is in the finance area, or maybe they're very good in the finance area, but they could use some help in HR. Okay, maybe they're great in HR but you know, they need help with understanding how the tech and the company works. And then, you know, we because a lot of times parents are worried one you know, our is is the business going to Continue in a profitable manner after I pass. But also it can be you know, I, they know that the family member is going to be able to run the business but maybe the the, the cycle, the blanking on my phrase here but the time to get up to speed Yep. can be short, okay. You know where you can identify some issues that could occur, you know that that would take a while to correct if if the original business owner wasn't around and prepare that, that family member to run the business in a good way and then avoid some of the downturn or the lower cycle or loss of revenue, just caused by that new owner, getting up to speed on how the business works.
Right, right. And that's understandable. Okay, I'm gonna throw another wrench at you. Okay, this. So I know probably three people where this happened. And you just give me your professional analysis and then what route you would take. And we kind of chatted about this before, but I'm just I love using the six this example because I think it happens more often than not where the, the husband or wife had the business and then all of a sudden, something happened and they're deceased, and then nothing was in place and the spouse or the partner, it's now thrown in their lap, and things are in probate and whatever, but they still have to run the business because there's employees there's, do you know, I'm saying like, there's all this other stuff that's still there, like that,
that can be prevented, right?
Oh, yeah, definitely. It can certainly be prevented. Yeah, that's probably a good way that a lot of businesses end up not making it past the first generation. You know, is because there is improper planning, maybe the business is going amazingly well, right before something happens to the main owner. And all of a sudden, you know, the business one isn't doing as well, because no one really knows how to keep up with what the business needs to get done. But then you've got these administrative hoops that you may have to go through in order to get access to accounts and those kind of things. And those, those aren't activities that are going to generate any money for the business. So and of course, no, this is legal advice, because I don't have you know, all the facts. But typically, what you can do is set up, you know, a trust, whether it's your vocable or your vocable. And that whether it's a revocable or irrevocable trust kind of depends on a lot of different issues, but And then, you know, you can have that business structure owned by the trust and a lot of cases, and then the there can be a buy sell agreement for the business itself. So if something were to happen to the owner, the buy sell agreement specifically says that, you know, the voting shares or the control or management of that company goes to a specific person that can then just slide into that management position and, and continue the operations of business without trying to go through probate or other administrative avenues to try and get control the company. And this is why I you know, when you're talking to attorneys, why it's so easy to say that, you know, if you think attorneys are expensive on the front end, you could, you should, you know, think about how much it costs on the back Yeah, yeah, cuz it's
one example it's costing her an arm and a leg to fix this now.
Yeah, yeah, you know, even on an individual basis, if you think about even a very basic financial power of attorney, you know, if you don't have one of those in place, a lot of times if you become disabled, your loved ones, you're going to have to go to court to get appointed your guardian, so they can make financial decisions for you, right? And you can avoid that by having a simple financial power of attorney in place. And when you avoid the heartache of having to make these type of decisions in a time of crisis, to the cost of having to go to court, and three, the time it takes just to get all this stuff done. And, you know, you hear financial advisors talking about avoiding your downside. And that's, I liken that to estate planning because if you have the right documents in place, the amount of down time, in downside you have is lessened by having these documents in place. And it does, it saves you that time it saves you the heartache and it it saves you the money from having to go to court to get get these things done. Right. So you know it. People sometimes this is definitely an area of law where people can drag their feet because they really kind of related to
their death. They don't think about incapacity.
Well and you know, it's like life insurance. Nobody wants to acknowledge that they're going to die one day. So the same thing with you know, the wills and trusts is nobody wants to believe or think that something bad will happen to them. You know,
we're all gonna live for it. Right?
But the thing you know, to emphasize is this really is protecting the people that get left behind. You know what I mean? Like, cuz?
Oh yeah, it's such a gift, it is such a gift to your loved ones to think ahead and have these things in place where it is so much easier to transfer these assets to who you'd like to receive them. And just, you know, because again, this is when they're dealing with these things. Usually it's in a situation where it's better that they that they're grieving or handling other things than having to worry about all of this stuff. I mean, the worst, you know, the some of the worst case scenarios that I've run into, or, you know, where you have an ailing parent, and the kids are running around, trying to help them get their estate planning in place when they should be sitting, sitting with them, having conversations, and just spending time with those loved having to try and do all this stuff last minute. So either Those, those those situations. I hate seeing those things because I know those people rather be doing something.
And, you know, one thing that I like to focus I mean, there is there's a lot of, I guess I'd say, you know that there can be, there's a lot of fear related to this. So, you know, in my practice, I try and help my clients focus on building a legacy instead of just checking boxes to, you know, easily pass on assets, because, you know, that's, I prefer to do that. And I think my clients appreciate it and I try to have as much fun as you can in this type of area of law. But I try and do, I try and focus on on those positive aspects of, you know, giving these type of gifts to your family and you know, setting up a legacy which is You know, what have you learned during your lifetime that you'd like to pass on here to your loved ones, so they don't have to go through the same things that you do and maybe, you know, start out a step or two ahead of where you are at a similar time in their life. Right.
So, so what would
give if you had to, like you're talking to now the universe of, you know, business owners, entrepreneurs and startups, like what is the process? What's the steps? Like, you know, let's say that you know, you're talking to someone like me who's been in business, maybe four years, you know, how what are the steps?
So the first thing we do is just get together and take a look at the what type of businesses it is it you know, manufacturing, is it a service related business? In certain circumstances, evaluation is can be a great place to start. Unfortunately, those valuations can be costly, you know, anywhere from 2000 up to 10,000 depending on the size of the business. Because a lot of decisions, you know, can be based on valuation. In those situations where you don't want to do evaluation, we come up with, you know, how will the business be valued in, under, in certain circumstances. So in debt, how is the business can be valued in that kind of thing, then we also identify those areas that may need help. So, if the business doesn't have the policies and procedures in place to allow it to continue if something were to happen to the business owner, that's, that's where we would, we'd start there as well. So and that doesn't always involve me that involves other partners who are better at that kind of thing than I am. And then, you know, we drafted by celebrating because, you know, when we know the value and we know what needs to be done, prior to the business Being marketable, we can draft those agreements either with the key employee or understand, you know, what the value of the businesses in order to equalize inheritance for for the other children or beneficiaries. And then we continually change it. As time goes on the business grows in value, we might want to change things. Okay. So we would just continue to review the status of the business and see if there any other documents that you know, would help with this succession planning process.
And that's really the best place to start him.
Okay. And then So, okay, so beyond that, your firm also does like basic business stuff, right? Like if I wanted to create an LLC or or C Corp or anything like that, is that what you guys handle.
Yes. So putting an LLC S corp C Corp together. doing that, so operating agreements for LLC is corporate books for corporations helping clients to put their, you know, annual minutes together. Okay, those kind of, but also lease reviews and contract reviews.
That Okay, yeah, because I know, the lady that I was telling you about earlier that the she was promised this business, she had to come up with her own lease contract, which she was like, I don't know how to do that. You know, I mean, and I was like, You need to find an attorney then because I would not make that up. You know, I mean,
no, no, yeah, you there there are. There are things in those agreements that you know, you want to keep an eye on, especially in the area liability, right.
Who is going to be responsible for what it's What happened?
So ideally, who are the different types of companies that you work with?
There isn't necessarily one specific type of business. Usually it's it's any type of business under, you know, I'd say 10 million in revenue a year and you know, you're everyone's definition of a small business is different, but that's that's usually the, the size of business that I work with.
but otherwise, yeah, it's any any type of service, manufacturing, okay.
And if someone was to look for an attorney, like what are some things that you would suggest that they should look for?
You know, make, you know, it needs to be a good fit. You know, when you're meeting with an attorney, you want to make sure that you are able to communicate with them in a way that you like to be communicated with, you know, because in most cases, you're going to have relationship with this person for a while. In the best case, and you want to make sure that it's it's, you know, that the personalities are good fit that the size of the office is a good fit for larger companies. You know, sometimes you, you may need a team of 10 attorneys, right, right. Yeah. If it's a smaller business, then you may not need that many attorneys. So just, you know, making sure that there's good communication and
How, how that attorney works and you know, just just making sure that it's a good fit, I would say is the most important,
right? And, and I'm sure that every attorney has a different way of pricing themselves. So making sure that you are very clear and upfront, and you understand, you know, what their, their pricing structure is, right?
Well, you know, like I said before, and the value is really the main thing because, you know, if, if there's, you know, you just want to make sure that the value you're receiving is is worth it, I guess is probably the best way to say it. Not not being so not being cost.
sensitive, necessarily, but just making sure that the value you're receiving is is You that You can see the value coming from the attorney because if if the attorney is able to spot an issue early on and avoid costs in the future, you know that that can be an issue. That can be extremely good. Oh, yeah, we're, you know, if they're, you know, if you go in and you just kind of check the boxes, you have the LLC created, you put the operating agreement in place, you have your stock certificates or unit certificates, membership, certificates, whatever you'd like to call them. But you really haven't had that conversation about some of the issues that could arise and where, where there could be liability, then maybe it was cheaper, because it didn't cost you a whole lot of money. But the you may have missed out on quite a bit of value there by not
having those type of conversations with your turn. Okay.
So in wrapping this up, give
like what can you You offer our audience today. If they're listening to this, I mean, are they able to reach out to you and ask you a question? How does that work?
Sure, yeah. I, you know, on my website, I have a button for a free consultation and that last an hour, usually depending on what the circumstances are, and they can come in, you know, if they have if they don't have any documents, they can just come in and we can talk if they have from a business owners perspective if they've created their own LLC, but they don't have an operating agreement or minutes. You know, we can they can come in and we can talk about what some of the corporate formalities are. And some of the formalities for LLC is just to, you know, make sure they are getting that liability protection from businesses and then we can also chat about some of the things that they'll want to keep an eye out, you know, for for an exit plan or business succession. Are there key employees that you They would like to groom or, you know, set up to take over the company and in the case of an unexpected loss or some type of disability, have that in place so they can continue the business and keep it profitable while the owner is unable to make those decisions on their
awesome, awesome. So in case, anyone missed it What gift said is there is a free consult, just go to the website. The website is what GIF
So that's how you get ahold of gift he's available to you. I appreciate your time gift. Thank you so much.
Oh, thank you.
And hope you have a great day. Thanks. Thank you.
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