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Entries in Business Attorney (20)

Monday
Apr162012

Flat Fee Indiana Business Attorney - Why I Do it

Attorneys and law firms are notorious for charging by the hour.  In some instances it is necessary, such as when very adversarial negotiations are involved.  My practice deals with mostly all transactional matter such as private funding, contract drafting, mergers and acquisitions, and general corporate legal advice -  and for all of those and more I offer flat fees.  Sure, are there instances when adversarial negotiations merit billing by the hour - but even then - I employ a hybrid flat fee / hourly billing method.  For example, in the M&A context, a proposal might look like this for a small $1,000,000 asset purchase when I represent the buyer:

 

  • Flat Fee  include initial draft of an Asset Purchase Agreement, one round of revisions, and initial drafts of up to 4 ancillary documents (i.e. a bill of sale, assignment and assumption agreement, consulting agreement...etc).
  • Everything above and beyond is billed hourly, unless we agree ahead of time on additional levels to the flat legal fee.

 

The key is defining the scope of the representation that is included in the quote for flat fee legal services.  

Don't settle for a retainer / hourly rate unless you have to.  Make sure you at least ask for flat fee legal services when you are looking for an attorney.

Wednesday
Aug182010

How to Spot an Attorney Trust Account Scam Artist

There is an internet / email scam that has been preying on attorneys for some time now that usually involves the following fact pattern or something very similar:

  1. Attorney (usually a solo practitioner or small firm) gets an unsolicited email from an alleged creditor (usually a foreign company) claiming that the creditor is owed a substantial amount of money from a debtor located in that attorney's home state.  The creditor states that it is interested in retaining the attorney's services for a very large contingent fee.
  2. Easy Money?? If it looks too good to be true....After a response from the attorney, the creditor then states that the debtor is very close to settlement, but that the creditor still would like the attorney to stay involved and essentially oversee the settlement. To make things appear legit, the creditor may ask for an engagement agreement from the attorney.
  3. As soon as the engagement happens, the creditor sends another email (note the trend of no phone calls at all) saying that, low and behold, the debtor has given in and will be sending a check to the attorney ASAP for some or all of the debt.  The creditor also will provide wiring instructions to a foreign bank and instruct the attorney to keep his substantial fee (for doing nothing - wow- quick, easy money).
  4. A check arrives, usually a bank draft/cashiers check (or at least it appears to be).
  5. Attorney deposits check into trust account, initiates wire to foreign bank, and withdraws contingent fee. Happy days - right?
  6. Wrong.  Turns out the original check was either bad or counterfeit, there were never any good funds in the trust account, the funds that were wired overseas are long gone, and the attorney is completely screwed for the amount of the funds that were wired out (of course the easy money fee is gone too).

 I get these all the time, and occasionally respond for shits and giggles.  Recently, I received a fairly sophisticated one where the creditor claimed to be a business in Colorado that was owed a debt from a business located just a few miles from me.  This guy used the name of an actual Colorado business, the name of an actual Indiana business as the debtor, actual names of the owners of each business, and even provided a Colorado phone number to call.  I did some research on both businesses - and noticed that the phone number and email address the scammer gave me was different from that which was listed on the creditor's website.  So I called the number on the website - and of course the creditor business guy had no clue what I was talking about.  

So I decided to mess with the scammer just to see what would happen.

Here is some of the original email chain (names of course have been changed to protect the innocent):

The original contact email and ensuing emails:

 

Your Name: Andrew Scammer
Your Email: andrewScammer4u@gscammerbla.com
Subject: Collection Matter
Message: Dear Counsel,
On behalf of Scammer Machinery Inc., we request your legal services
and possible representation on a Debt Recovery matter
involving Scammer Machinery Inc and a client in your jurisdiction.
Our legal representative won't be able to take on this
matter since it is out of their jurisdiction.
Do let us know if you are currently accepting new clients.
We look forward to a prompt response from you.
Thank you very much.
Sincerely,
Andrew Scammer
Scammer Machinery Inc.
--------------------------
Mr. Scammer:
Thank you for the email.  Do you have any availability to chat about this sometime on Tuesday - perhaps in the morning?
Best Regards,
Brian Powers
--------------------------
Dear Brian Powers,
Thank you for your prompt response to my email.However,this is an official request for your services on behalf of my firm towards debt recovery.I will be calling your office to further discuss this matter with you or you can reach me via the telephone number below at your earliest convenience.
 
We are currently facing severe pressure from our supplier to pay up the balance funds that we owe to them.This debt is as a result of an outstanding payment for goods supplied to Debtor Machinery LLC ,valued at $485,760.00. (Four Hundred and Eighty Five Thousand,Seven Hundred Sixty Dollars).The said outstanding payment was for goods delivered in good condition. Due date for payment was set for the 27th of October,2009 as stipulated in our supplier's invoice. After this agreement was breached,we had a lengthy negotiation,and consequently agreed to extend payment to a deadline of 27th of January, 2010.
Quite unfortunately, the extended deadline was not also honoured.We will like to draw your attention to the relationship with our customer which has been cordial and we have had a successful business relationship over the past few years,and it is in our position to maintain this relationship after collection of the outstanding sum owed to us.
If your firm is retained, our expectation of your services for now will be within the scenario of a phone call or demand letter to our customer. This approach will trigger the much needed response from our customer towards payment,Otherwise,litigation will be the next option.We intend to give out a certain percentage of the payment if a lawsuit is not filed before we reach a settlement with our debtor.To be precise we are ready to give out 10% of any amount collected before a lawsuit is filed, this will compensate for your retainer amount and all other legal expenses.We do hope our customer responds to this informal approach of resolution,otherwise,we will pay up your retainer amount and all other charges before we commence the litigation process.I will also provide you with all relevant documents as soon as we are ready to go into the litigation process.
If this is acceptable to you and its a case that you can handle,please do let me know as soon as possible and also provide me with an engagement letter.We look forward to your prompt response.
Thank you
Sincerely,
Andrew Scammer
Scammer Machinery Inc.
Sweet - new business.  Lets get this rolling - not even going to ask for an engagement letter...
Andrew:
I do not need a formal engagement letter, just please reply that you agree that any debt collected on your behalf will be paid directly into my attorney trust account, from which I can deduct a 10% fee and then wire the balance directly to your account.  The amount of my fee would be 10% of anything collected on your behalf.
Also, I would need to see a copy of any relevant invoices and /or contracts with the debtor.  Please scan those in and send them to me via email.
Best Regards,
Brian Powers
---------------------------------------
Dear Brian Powers,
Thank you for your email,however my firm will prefer a formal engagement letter stating the agreed terms for documentation purposes.
Please do email it to me for my review and signature.
I look forward to hearing from me.
Regards
Andrew Scammer
-----------------------------------------
Mr. Scammer:
I appreciate the fact that you require proper documentation prior to the begin this process, therefore I look forward to receiving your signature to the attached engagement letter. Once we are engaged, please also provide any documentation regarding the outstanding debt.
Best Regards,
Brian V Powers, Esq
Wow - this guy must be legit if he is demanding an engagement agreement.  Well ok....

Dear Brian V. Powers,
Attached is the signed copy of the fee agreement.Please,do acknowledge receipt.
I am looking for a way forward in this matter and I am satisfied with the details portrayed in the agreement.I will be sending a hard copy of the documents in the mail to your office.
We have been communicating with our debtor Mr. Larry Debtor of Debtor Machinery LLC,over the past few days regarding our intention to take legal action against them,we have informed them that your firm will be handling this case from henceforth and that any further communication should be directed to your office.However,they have stated clearly that they want an out of court settlement,thereby pleading for more time to set up the payment.As I have earlier anticipated,We prefer to reach an informal resolution and still maintain a good relationship with our client. 
This morning, I received a call from Mr. Larry Debtor,that he will be making a partial payment of the money owed to us to avoid any legal action against them.We strongly believe that they have resolved in making this payment due to our recent legal stance.
They have promised that they will be sending the partial payment directly to your office on or before 30th of July, 2010 and the balance will be sent out on the 6th of August, 2010 to avoid any lawsuit.
I suggest we give them the requested time to come up with the payment,and if they should fail to make good their promise this time,then you can send out the demand letter and consequently litigation.
Please,be rest assured that if your office should receive this payment as promised by our debtor,your 10% fee still stands according to our agreement.
I await your acknowledgment of this email and also give me a call if you have any question.
 
Thank you for your services.
 
Sincerely,
Andrew Scammer

 

Wow - this is going to be some easy money - I'll believe it when the check shows up...


Dear Brian Powers, Esq.

I have been reliably informed by my debtor that payment has been delivered to your office.Please confirm this payment and as well deposit it in your firm's trust account pending further instructions.

I look forward to your timely response.

Thank you.

 

Huh - ok - I'll still believe it when the check shows up...then POOF:

 

Wait a minute, why is this debtor with an address right across town from me sending me Air Mail from Canada?  Wierd.

 

Wait a minute - looks like someone is not as sneaky as they thought.  The bottom of the letterhead has a Canadian address.  Or maybe the scheme here was to say they have a Canadian division that was responsible for sending the check - who knows.


Eager to make some quick money, I got greedy and tried to change my deal:


 

Andrew Scammer,

Sorry to hear about your dilemma with the supplier in Duck Dong. I will deposit the check into my trust account and await further instructions.  Although, Hong Kong is really far and across an ocean?   Are you certain a wire transfer would make it that far?  We can try, and if the wire can't go that far, I could always fed ex a check. I would also be happy to review the contract with your supplier to see if you have any cause of action, butt that is unlikely.  

Finally, please be advised that I must adjust my fee to 33% for the additional admin work of negotiating a settlement with your supplier and for initiating an international wire(that can't be easy to do...just so far).  

Best Regards,

Brian V Powers, Esq

 

To that, I got nothing but crickets. 

Needless to say, I did not deposit the check, nor did I ever have any intention to do so. I made some law enforcement contacts to no avail. It is crazy to me that (a) people are falling for this, (b) the banking system is set up in a way that would allow this scam to happen, and (c) that there is little or no recourse for an attorney when it does happen.

So, the best way to avoid this whole mess is to spot the scammer at the get go.  Some tips:

 

  • Be wary of ANY potential clients that contact you via email to collect a debt and immediately offer up a substantial contingent fee.
  • Be especially wary of such a potential client if it is an international client (or claims to be).
  • Do some due diligence on the potential client before you email them back.  Google them.  Look for websites, yellow page listings, LinkedIN entries...etc.  But don't trust just what you find easily on the Internet.  
  • If there is a website for the potential client, run a Whois search to see how long the domain name has been registered - and to whom it is registered.
  • Try to find contact information for the potential client that is independent of what you received in the email - then use that information to contact the potential client.
  • ALWAYS call the potential client - don't just rely on email.
  • If you receive mail from the potential client, pay attention to the postage markings - if mail is being sent from somewhere other than the address the potential client is claiming (especially a foreign address) - stay away!
  • Never, ever wire funds from your tryst account until all funds have completely cleared from any underlying deposit.

 

 

 

Wednesday
Jun232010

Indianapolis Attorney Brian Powers (that's me) Quoted in Article Regarding Equity Financing

Bank of America has a website called Small Business Online Community, the mission of which is to "create a thriving online community that empowers people in building a successful business."  A few weeks ago, a gentlemen called me, after reading some of my posts on IndianaStartup.com and interviewed me regarding the raising capital and potentially giving up control in the process.  The article, which you can find in its entirety here, is pretty good, and give some interesting perspectives (other than just mine). 

Here are some excerpts quoting yours truly:

Still, Indiana business attorney Brian Powers, who also runs the blog http://Indianastartup.com, points out that such a power-sharing arrangement can work-it just depends upon the individual circumstances of the parties involved. "Investor control is not necessarily a bad thing, especially if you have a young business that will be gaining partners that have greater industry expertise and business connections than you do," he explains. But if a business owner can't take an emotionally detached look at his company's real long-term needs, he or she might be better served by bringing in a third party to help facilitate offers and find the best match. "That's what I often do," Powers explains. "I end up helping companies through the process of figuring out that what they're usually being offered is a pretty good tradeoff for the money." 

 

What helps Powers assess what is or isn't a pretty good tradeoff is the fact that he's been on the other side of the table. "In 1998, I was part of a dot-com startup company that raised $1 million in capital through an equity round," he explains. "Back then, though, we got ridiculous valuations and didn't have to give up control to get it. Those days are long gone now." For a short primer on these valuations and their role in determining equity investment, check out Powers' blog: http://indianastartup.com/business-funding/raising-venture-capital/raising-venture-capital-how-much-should-you-give-up/.

 

 

Wednesday
Aug122009

Buying and Selling a Bar - Attorney

Owning a bar. At some point, whether it be while watching Cheers or hanging out of the local pub, most guys envision how cool it would be to own a bar. The camaraderie. The chance to be "that guy" that owns a bar. People who own bars, though, will tell you that it is a rough business. First of all, it is a cash business by nature. Bar owners are constantly worried about employees skimming off the top - although the commonplace use of credit and debit cards has minimized that to a degree. Bar owners also are forced to deal with the unique liabilities arising from selling alcoholic beverages.

All that being said, a bar is a lot like any other business, and bars are bought and sold as businesses all the time. The sale takes place just like any other sale - by selling assets, selling stock, via merger...etc. One of the unique aspects of selling a bar is the disposition of the liquor license. Typically a liquor license / permit is issued for a particular location and to a particular business entity. Any time the ownership of the bar business changes (whether through an asset sale or a stock sale), the approval of local and/or state regulators will be required in order to transfer the license. In Indiana, for example, the approval of the Alcohol and Tobacco Commission is required. This process can take time, sometimes up to 3 months (or more). Many times the buyer of a bar will want to operate the bar in the interim period while the approval is taking place. This is a very tricky process since legally the buyer of the bar may not sell alcoholic beverages until the license has been transferred from the seller.

One way to accomplish this is via a management agreement that allows the buyer to "manage" the bar during the time when the license transfer is being approved. It is important that this agreement is done right and in accordance with applicable laws. Something important to keep in mind - if the assets being sold include existing inventory of alcoholic beverage, title to the inventory should NOT change hands until the license/permit transfer has been approved.

 

 

Tuesday
Aug112009

Buy-Sell Agreements - Attorney

A good buy-sell agreement can prevent conflicts between business owners and help maintain the closely held status of a small businesses. In the context of a corporation, this issue is typically dealt within a buy-sell agreement between the shareholders; in the context of a limited liability company, buy-sell provisions are usually drafted into the operating agreement. Any business that has multiple owners should always deal with this issue, in writing, before potential arguments and problems arise.

If you would like to see more information regarding the types of questions business owners should consider when having a buy-sell agreement prepared, check out my recent blog post on the topic over at IndianaStartup.com.

Monday
Jun222009

Business Start-Up Attorney - Employees vs Independent Contractors

 One question I get from quite a few start-up clients of my business start-up law practice, is whether they should hire employees or independent contractors. After a brief discusion, those clients usually will opt to classify new workers as independent contractors instead of employees. This is mainly a cost saving decision. The costs attributable to hiring employees can be substantial, including workers’ compensation, unemployment insurance tax, social security tax and withholding and local payroll taxes.


A good start to identifying workers as independnt contractors vs employees is to have a properly drafted agreement signed in writing by the company and the worker, although simply identifying a worker as an independent contractor, even in a signed agreement, does not mean that the law will recognize the worker as such. The law will look to factors such as the degree of control and direction the company has over the worker. Misclassification of a worker can lead to obligations to pay back taxes, penalties, and interest payments.

If you are a start-up and have questions about how to classify your workers as independent contractors, make sure you seek the legal advice of a good business start-up attorney.

Tuesday
Jun092009

Small Business Law - SBA Interest Free Loan Program

The Small Business Administration has a new loan program for certain established small businesses that provides interest free loans - America's Capital Recovery Loan Program.  The new SBA loan program, according to the SBA:

ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs. For example, making loan payments on existing loans with proceeds from an ARC loan can allow a business to focus more funds on core operations, such as buying inventory or making payroll.

ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.

The best candidates for ARC loans are small businesses that in the past were profitable but are currently struggling, yet have been making loan payments or are just beginning to miss loan payments due to financial hardship.FAQs for Lenders and Borrowers.

ARC loans are made by commercial lenders who are SBA participants. The SBA will pay these banks a monthly interest rate throughout the term of the loan. Lenders can find more information here. Non-SBA lenders can easily become SBA participants by working with their nearest SBA district office. Businesses interested in applying for an ARC loan should first contact their current lender.

In order to qualify, a small business must be an established business, have financial statements demonstrating it was profitable in one of the past three years, and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval. If your business does not meet these criteria, you can discuss your eligibility with your lender. ARC loans are not designed for start-up businesses.

You should always consider consulting a corporate finance attorney prior to taking out any sort of business loan to help you understand and receive favorable terms.

 

 

Monday
Jun082009

Private Placement Attorney - Brief Overview of Rule 504

One of the exemptions from the federal securities laws regarding the registration of securities offerings comes in Rule 504. Rule 504 provides an exemption for the offer and sale of up to $1MM of securities in a single twelve month period. In general, an issuer may not use public solicitation or advertising to market the securities. Purchasers must receive restricted securities, meaning that the securities may not be sold without either registration or an applicable exemption. Unlike some other exemptions, Rule 504 allows for a private sale without any specific disclosure requirements, although care should be taken to provide sufficient information to investors to avoid violating the anti-fraud provisions of the federal securities laws - as I mentioned in an earlier post - disclose, disclose disclose. Make sure there are not only no false statements, but no misleading statements either, and no omissions that might make what you have disclosed misleading.

As always, make sure you get the advice of a securities attorney with private placement experience.  There are lots of complicated regulatory requirements to comply with, both on the state and federal level.  A private placement attorney can help you navigate the regulations and to draft your private placement memorandum.

Sunday
May312009

Business Incorporation - Why you should consider your home state.

Martin Zwilling over at Startupprofessionals.com has a nice post regarding why start-ups should consider incorporating / organizing their business in their home state.  The post can be found here, but here is a brief summary:

  • Don't automatically flock to incorporating in Delaware.  Sure there might still be some advantages to doing so, but they don't really apply to start-ups.
  • In Indiana, where I practice law, the filing fees for incorporating a business are inexpensive and the process is relatively straightforward - not the case in popular states such as Delaware and Nevada.
  • Attorneys in your home state, if you are using an attorney (hopefully you are), will be more familiar with your state incorporation laws.
  • Your company may qualify for an intrastate securities law exemption in the event it offers securities for sale.
  • There is no need to register as a foriegn entity in your home state - and added expense if you incorporate elsewhere. 

As he points out, there are many other concerns that should be addressed when determining in what state you should incorporate - concerns you should address with a corporate attorney in your home state.

Friday
May292009

Private Placement Attorney - The Basics of Raising Capital with a PPM

If you are looking to raise capital for your business, a private offering of securities might be one avenue for you to consider. Selling securities, whether it be to friends and family, or to angel investors, is an excellent way to raise capital if you are prepared and do it the right way. But beware, as the sale of securities (i.e. stock, notes, LLC interests...etc) is a highly regulated area on both the state and federal level. The following is intended to provide a basic understanding of raising money through a private placement. You should retain the services of a private placement attorney to advise you through the entire private placement process.

The SEC created Regulation D, which sets forth certain rules for private offerings. By following these rules, an issuer (i.e. a company selling stock or other form of security to raise capital) generally may raise up to $5,000,000 without a public offering.

Generally, a private offering may have no more than 35 investors. On the federal level, though, certain high-net-worth investors defined as "accredited investors" may be excluded when calculating the number of investors. There must also be NO general solicitation for investors by the issuer - no advertising, no seminars. Just this weekend I came across someone soliciting the "private" sale of securities on Twitter - definitely not a good idea if you are trying to comply with the registration exemptions under Regulation D.

The federal securities laws for both public and private offerings are based on the premise that investors in securities are best protected by the disclosure of all relevant information regarding the securities and the issuer. The underlying guideline in this respect is Rule 10b-5, which requires the issuer to disclose to investors anything material that a reasonable investor would want to know prior to making a decision to invest. This is why PPMs are stocked to the brim full of material facts, disclaimers, and lots and lots of risk factors. Failure to properly include these and other items may subject the issuer to serious liability, including being forced to buy back the securities from the investor, as well as damages. If you want to avoid liability, overdisclose, do not hide anything, and do not mislead (among other things of course).

Keep in mind that there are also state "blue sky" laws to comply with - and they will need to be complied with in every state that a security is offered and/or sold.

Make sure to consult a private placement attorney  / securities law attorney before you raise capital for your business.

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The Law Office of Brian V Powers can help your business raise capital and help draft a private placement memorandum (PPM). Contact us today.