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Corporate records

When you organize your business as a corporation, there are certain record keeping requirements you must adhere to.

Components of a good contract

Business-to-business agreements should be in writing (personal agreements with friends and relatives also fall in the “put it in writing” category). If the contract touches a matter of any significance at all, then best to include all these components:

  • The Parties
  • Description of the goods or services to be procured
  • Delivery/Performance
  • Price and Payment
  • Length of Agreement
  • Termination of Agreement
  • Warranties
  • Indemnity
  • Limitations of Liability
  • Misc. Clauses, e.g. choice of law

Put Your Agreements In Writing

Business-to-business agreements should be in writing (personal agreements with friends and relatives also fall in the “put it in writing” category). If the contract touches a matter of any significance at all, then best to include all these components:

  • The Parties
  • Description of the goods or services to be procured
  • Delivery/Performance
  • Price and Payment
  • Length of Agreement
  • Termination of Agreement
  • Warranties
  • Indemnity
  • Limitations of Liability
  • Misc. Clauses, e.g. choice of law
  • What Do Most Troubled Companies Have In Common?

    According to George Cloutier, most troubled companies “…have not implemented strong financial reporting. Small businesses fail to focus on the basics – doing your P.& L.’s [profit and loss statements] and paying attention to cash flow.”
    Read the entire article from this consultant at NY Times

    A Deal Is A Deal

    I have conversations with the indebted, (i.e. businesses and persons that are in default on a financial obligation) on a daily basis. They welched on a deal, and are often looking for a way out.

    Call me old fashioned (or naïve), but when you enter into an agreement and the other party has lived up to their end of the bargain, then you should also. In spite of this, I frequently receive requests for settlement. It goes something like this: “I owe your client $50,000 and yes, your client’s service met our expectations. But, can I send you a check for $25,000 and call it even?”

    There are valid reasons for nonperformance of an agreement, but they are rare. Accountability is crucial in our society. Therefore, I have no qualms about garnishing and seizing assets when the debtor has no justifiable reason for nonpayment. Maybe I missed the newsflash, but since when is a deal not a deal?

    What is a “confession of judgment clause?”

    Suppose that your customer owes you $50,000. Further suppose that your good friend the oil and gas well lien cannot help you since the debt is 12 months old.

    In order to avoid a breach of contract lawsuit, the debtor agrees to sign a promissory note, which provides for regular monthly payments on the principal and interest. A shrewd business owner will require a “confession of judgment clause” in this promissory note as an enforcement tool.

    The confession of judgment clause allows your attorney to appear before a judge and secure a judgment without process. The clause may read like this:

    To further secure the payment of this note, Debtor irrevocably authorizes any attorney of any court of record to appear for Debtor in term time or vacation, at any time and from time to time after payment is due, whether by acceleration or otherwise, and confess a judgment without process against Debtor, in favor of Creditor for such sum as may appear to be unpaid and owing thereon together with interest, costs and five (5) percent attorney’s fees, with minimum attorney’s fees of Two hundred dollars and no cents ($200.00) and to waive and release all errors which may intervene in such proceeding and consent to immediate execution upon such judgment, hereby ratifying and confirming all that said attorney may do by virtue hereof. Debtor hereby waives the benefit of every statute conferring upon him any right or privilege of exemption, stay of execution, or other relief from the enforcement of a judgment.

    The Word On The Streets

    In the last six months, I’ve repeatedly heard “we’ve never had a problem with bad debts until now.” Here are some tips:

    1. Be deliberate about your credit policy. Identify high-risk customers, and mitigate that risk wherever possible. Use up-front payments, personal guarantees, co-signors, accrued interest and liens.
    2. Start early. Amex sends me an electronic notice 5 days before the payment is due. Below, you’ll find some letters that may help.
    3. Memorialize everything. Write a note to the file anytime you speak with a debtor: who, what, when, where, why? Also, send a letter to the debtor after every meaningful conversation. Something like “as we discussed, you agreed to send us $5,000 now and the remaining balance in 30 days.

    Sample letters to your customers:

    INITIAL LETTER TO YOUR CUSTOMER

    Dear _____:
    
    This letter is a friendly reminder that payment on your account 
    in the amount of $________ was due on ________.   
    If you have already sent us your payment, kindly disregard 
    this letter.   If not, please send us your payment promptly.
    
    Yours truly,

    FOLLOW UP LETTER TO YOUR CUSTOMER

    Dear _____:
    
    This is our second reminder that payment on your account in 
    the amount of $________ was due on ________.  We value your
    business and hope to keep you as a customer.   
    However, we do require payment according to the terms of 
    our invoices. Please send us your payment promptly.
    
    Yours truly,

    FINAL LETTER TO YOUR CUSTOMER

    Dear _____:
    
    This is our final reminder that payment on your account 
    in the amount of $________ was due on ________.   
    If we do not receive payment in full by _____, 
    we will submit your account for collection.
    
    Yours truly,

    Are You a Careful Steward?

    Seneca (4 BC – 65 AD) said:

    It is not that we have so little time but that we lose so much. Life is long enough and our allotted portion generous enough for our most ambitious projects if we invest it all carefully. But when it is squandered through luxury and indifference, and spent for no good end, we realize it has gone before we were aware it was going.

    So it is: the life we receive is not short but we make it so; we are not ill provided but use what we have wastefully. Kingly riches are dissipated in an instant if they fall into the hands of a bad master, but even moderate wealth increases with use in the hands of a careful steward; just so does our life provide ample scope if it is well managed.

    Excerpt from my favorite blog: http://www.adamsmithesq.com/

    On August 27, 2013, Gary Quinnett presented a legal seminar on commercial real estate issues. The attendees rated him "Excellent"