Unedited Transcript Below:
SUMMARY KEYWORDS
business, people, business partner, conversation, business owners, attorney, lawyer, understand, agreements, legal, clients, contract, form, barbecue, planning, relationship, person, running, point, idea
Michael Baker 00:15
Thank you for anyone and everyone that’s here and those that will watch this, just for your information, started these webinars in an attempt to help business owners, people with their finances, especially in the wake of COVID. One of the things we realized, as I was having more and more conversations with people last year, is that not that you could prepare for an event like COVID-19. But it caught so many people off guard, in their finances, in their work life in their businesses, and a lot of people did not know what to do everything from how to market your business, how to grow your business, how to even survive, people were having to learn in real time on the fly. So with all of that as pretext I decided, hey, let’s get some of our local business leaders, local people who are experts in marketing people who are experts in legal and financial matters, different topics that would be relevant to investors and or business owners or people who are thinking about starting their business. And that’s what we’re trying to do. And so today, we’ve got a longtime friend of mine, longtime business associate. His name is Trey Nantz, Trey is the owner and the I don’t know what you guys in the legal world call each other. I’m just gonna call you King attorney at Nantz Law. And Trey’s going to talk to us today about some, you know, important things that we should think about, or you should be considering when you are either in business or thinking about going into business. Because one of the things that happens a lot of times, is when you have a major economic event, and you have people being furloughed from work, people being laid off from work, jobs being eliminated, jobs being shuffling, we go into this season where there’s remote work, one of the things that tends to happen is people decide, you know, what, now’s the time for me to start that business, now’s the time for me to change my business. And we want to make sure that we’re getting great information and insights out there to people that are doing that. So with that, without further ado, Trey, please say hello, say hello, introduce yourself, and we’ll get rolling.
Trey Nantz 02:22
Good afternoon. And thanks, Michael, for having me, I appreciate the opportunity to kind of discuss kind of continue some discussions that we’ve had often on on the past about some specific client issues and kind of the world generally with some of the things that you and I see and in our world kind of overlap a good bit on that a little about me, I think, as you mentioned, I’m the managing attorney at Nantes law firm. We have offices in Rock Hill, Fort Mill, and then one down in Charleston. Our primary practice areas are business and residential, commercial real estate and doing some sort of state planning to the complex tax planning, nothing like that there are other colleagues in the area that are far more qualified and expert in those very nuanced areas. They can get really arcane and complicated pretty quickly. So I’m happy to defer to their expertise on that. But we do those kind of three main areas. And we I think we do those pretty well. Now I’ve been doing it for it’s hard to believe over 10 years now. I’ve been having some of these conversations and dealing with some of these, these issues and have clients that have lasted that was pretty cool.
Michael Baker 03:34
Now wonderful, it’s great to have you man, I know, as one of the things that I have found is that, you know, the longer you go in business, you begin things tend to shift from theory to experience and stuff that you’ve had to live through and endure. And, you know, both of us are still I think it what we would consider to be younger men. But having been in, you know, in business for a little while is we’re starting to have a lot more anecdotal evidence to go along with best practices. Absolutely. And so, you know, to kick things off, you know, one of the things that I would definitely ask you, and this is kind of a, you know, an easy question to anticipate, but is, when someone’s thinking about starting a business or running a business, like what, what’s some of the biggest mistakes that they can make, you know, coming out of the gate that they may not even realize they’re making?
Trey Nantz 04:31
Well, I think it’s mistakes that really happen on both sides of it. You mentioned that, you know, we’ve seen a lot of changes in people’s professions and worked in employment needs to COVID. I think when you have the application meeting pressure like that we’ve seen kind of broadly with COVID in the economic challenges that a lot of people have had through that. That’s both a challenge and impediment to not just new businesses and people that are going to set up their own or maybe have a side hustle or whatever, but also with people that are already in business, maybe they’re taking on another investor to help with liquidity, maybe they’re bringing on a partner, maybe they’re making some an employee, a partner, maybe dealing with different issues from from an operating standpoint. So when you have that pressure, you start to see the cracks, and all the good intentions that you have when you first start with all the positivity and the optimism, here’s the lawyer bringing everything down again, right? We have all that positivity, the nothing can ever go wrong. When you and your business partner or you on your own, start your business, it’s the greatest thing in the world is the next big idea, this is going to be the next big thing, I’m going to go conquer the world. It’s all hunky dory and sunshine and lollipops. When you start reaching these challenges, you start realizing that maybe you’re really good at making your widgets or running a restaurant. But you’re not the world’s best at financial forecasting, planning, legal contract work, maybe you don’t understand the contracts that you’re getting from your vendors. Maybe you’re not aware of the liability risks that you have, the type of business that you have, and every business has liability risk. That’s the first thing we’re going to like to point out as being the biggest reason that you need at least have a conversation about incorporating a business, whatever format that ends up being best for you, we’ll talk more about that I think is is separation of the business as a person or an entity from you individually. And that’s a weird, abstract idea that a lot of people struggle with, because you get that cult of personality is that I am the business, the business is me because I’m the one that’s showing up and sweeping the floors every morning and locking it up at night. That’s true, but the business is not your home, it’s not your kids, it’s not your personal retirement is not you individually. So you get this weird feedback loop of the business owning you rather than even owning the business. It’s important to keep those things separated. Because as you move forward, the formalities of what you do as you operate the business are become more important, not just from a liability perspective than an operating perspective, but also from a tax perspective. So that’s, that’s why it’s very important to be aware of what you’re not good at, in addition to what you are good at.
Michael Baker 07:20
That’s great man, and wanted to piggyback on one of the things you were you were touching on? I think we are we’re now in an age where people are almost being conditioned to their first, their first option for anything that they don’t know is to go quickly to Google. And nothing wrong with that with seeking out information. But there’s also the world of being placed on Google, how you know what, how to be found online. And in a, in a world where people can create content, there are, you know, business entities that literally exist in the internet, you know, in the interwebs, you know, that, that not necessarily a brick and mortar, and I find that it’s getting, while information and access to information is getting easier and easier. It’s also getting easier and easier to get bad information, especially online. And one of the things that I have seen written out and it made me makes me cringe. But it’s people that are, you know, wanting to be influencers or, you know, be famous on a lot of social media platforms that they will just dole out advice as though, you know, they’ve, they’ve got your credentials, you know, they’ve, they’ve had a law firm for 10 years, they haven’t, you know, and one of the things that is often said to people is, first thing you need to do is form an LLC, because that protects you. And a lot of people think that just the nature of you creating an LLC and having an LLC in existence, you are now somehow completely absolved of liability in South so I would love it if you would speak to that a little bit.
Trey Nantz 09:05
Well, in this kind of a thing, that’s the play on an online services, catchphrases and legal services, your direction that the question is, do you know what direction you’re going? In? Just because you watched a YouTube video one time doesn’t mean that you know, the direction that you’re going in that that facade quickly shatters A lot of times when when I have some conversations with people and they’ve, they’ve taken that first step, and they filed their paperwork, and they think I’ve got it all locked up. We’re good to go. We’re going to go buy this building. And we’re going to go do this vendor contract for these materials to go make our fencing or whatever they’re they’re doing for the business. Then we start asking these start picking away various surface level kind of these things. Do you have your operating agreement? Do you have your bylaws? Do you have your corporate resolutions? Does your business partner have to have authority to sign this deed with you or whatever the case is, and so then we end up Having to scramble to fix the problems on the back end. When we’re on a hard closing deadline, or a business transaction or or real estate acquisition, or one of those lines released, business partners in California or Texas, you know, somebody else’s up in Canada, we’re trying to get these signatures, then also on this FedEx expenses get very, very high. And they have to get these things signed, which is, you know, the logistical challenges with COVID. Not the shutdowns is not, not all notaries are always available. You can’t go to the bank like you used to and get it stamped, even if they would do that. So a lot of the big big thing, the first big thing that you can do is plan it sit down, sketch out, what am I going to do? How do I need to do it? Who do I need to talk to? Number one, need a finance person too, you need a lawyer three, you need a CPA, and not just attach preparing CPA but a business account, somebody you can talk to about these are the challenges that I’m going to have and then start putting in place all the kind of backfilling the questions of what kind of entity is best? What’s the business going to look like? Am I going to have investors Am I going to have business partners Am I going to try to take this thing public am I going to do some crowdfunding in which case you have a whole separate set of security laws that, okay, maybe you can find a guide for online. But to your point, anybody can very easily go on the Secretary of State’s website, download a PDF form, type it in, send it in with their filing fee, and boom, you’ve got a company, it’s a very easy thing to do. And any person can do that. But that’s, that’s not always the best thing to do. Because when you’re not paying attention to the details, you’re not actually doing the rest of the work. That’s, that’s the first step of the 87 other ones that you need to do, you’re not getting all the documentation in place, you’re not managing your risk, you’re not getting your proper authorities, you’re not necessarily choosing the best entity, an LLC, to your example, is a great entity, it’s got a lot of flexibility, it’s got a lot of options, it’s got a lot of things you can do, if you understand the type of structure that it is to make it tax into bed pages to give you proper liability protections, if you do it the right way. And sometimes it’s even questionable, if you do do it the right way, regardless of the entity, you know, it’s called piercing the corporate veil, just because you have an entity and even if you go to me or any other lawyer, and they form it, because that’s what they do. And they’re really good at doing corporations, they’re really good at doing LLC, you have an operating agreement, all the documentation in place, if you do something that’s willfully grossly negligent way outside of the bounds of sec, then you can’t just go that not me because I have a business, you sue them, plants attorneys will go right through that. So you’ve got to be aware of not only the the importance of having a good professional and a conversation with a professional when you’re setting the business up and planning the business, and you before you start contracting out and selling your widgets for whatever you’re doing. But also the importance of having that relationship as you progress and evolve through the business. You know, we’ve got clients that our business clients that have been, we’ve had a relationship with for five 710 years, think we have something in common, you know, people that were there, if they have questions, we have visibility into their business. And when things come up, they have somebody that they can call that they already relationship with, it already understands their business, they already understand their challenges that understands their goals, and can help walk them through those challenges as they come up, and can also help them proactively manage their business as they continue to grow and evolve. as business owners and as the business continues, hopefully to go up. And especially so over the last year again, going back to the COVID thing.
Trey Nantz 13:45
Those relationships were very, very important for the for the clients is that they had somebody to call right away. It’s like, Okay, we’ve got this massive amount of retail space. And you helped us negotiate the lease three years ago. But we can’t sell anything. It’s we’re trying to pivot online and sell all of our goods online, because we have the stock rooms in this inventory that goes COVID hidden, we have all the spring stuff out on the floor. That’s our money. What do we do with that? Because we’ve got to sell it, we don’t sell it, we’re going to 100 Oh, by the way, we’re still paying full pop rent on this, you know, prime retail space, but we don’t have any customers because we can’t how do we handle that? Okay, do we do an abatement? Is there some type of clause in your vendor agreements where you can defer receiving new product if they can even deliver the product? website terms of services for that online migration that some people did really, really well? employment contracts, you know, where are your obligations to your employees, if you have a contract with them? You know, all these little things that tend to pop up that people don’t anticipate, again, when you get pressure applied to the business and apply to the economy, the cracks extend tend to form. How do you do you have a religion should be for somebody to help you from the formation phase. Now through your execution phase, address some of those issues. And I think that’s, that’s, to me, the most important thing of having a professional relationship with with an attorney, not just in making it form correctly, but making sure that you execute wisely, and you manage those risks, that’s a big part of what I do as a business lawyer, is have those conversations and help manage those risks, manage those situations, give advice, and sometimes it’s more psychologist and counselor, then it is kind of a legal technician. But those those things are very tightly paired. And it’s, that’s the value add that you get out of that that professional relationship.
Michael Baker 15:43
Awesome. So you mentioned several times, professional relationship, and I think that, you know, anyone that’s been in business for a long time, would cosign that sentiment immediately, because you, you get those people that are on your bus with you, you get them in the right seats. And, you know, as you start to go along, they go through a lot of the experiences that you go through as a business, you know, dealing with, you know, contract or legal challenges, bringing only employees, training employees, watching your business grow. And I think, you know, there’s a, there’s a, you know, kind of a synergy that happens when people can walk down that road together, because you know, now suddenly, you look back, you’ve got five, 810 years, 12 years, 15 years working together, and you both can still remember back when this business was just an idea, or just starting in the original vision. And you might have the ability to speak more credibly than someone who’s just going to come in and look at numbers on piece of paper and say, you know, here’s what, you know, here’s what the numbers show, there’s always a story behind the numbers. So to that point, you know, for my people that are starting out, or people that are, you know, going down this road, and they’re thinking to themselves, you know, what, I probably do need to find me a good business attorney, or I do need to find me somebody that can help me with some of these other pieces of the business that I no longer want to be the person in charge of? How would How can I mean, what are some ways that they could, you know, talk with someone like yourself, or how do they interview someone to know, like, hey, if this if this person has what I need, because, you know, I think one of the things that I know, we run into in my business all the time, is, you know, people will say things like, Well, you know, you guys all do the same stuff. Are you ladies, you know, ladies, too? You know, I mean, we’re all we’re all inclusive here, you know, but, you know, you all sound the same, you all sound the same. And, you know, part of my response to that is, whoa, legally, that’s what compliance makes us do is we all have to end up doing the same. But, you know, from from an attorney’s perspective, you know, there are attorneys that can do multiple different things. But we you got, you guys have specialties too, you know, and just because I use this phrase the other day, so just because somebody can do something doesn’t mean they should be the one to do it. And so, you know, although, you know, hey, we love our great friend, you know, that that does this service, or provides a service, they may not be the best person to advise you on your business, because that’s just not their area of expertise. So how does somebody begin the process of vetting an attorney like yourself or anyone else? And how do they, how do they, you know, what are some things they need to look for? Or questions that they can ask that may give them some insights into that?
Trey Nantz 18:46
Sure. So I think really depends on where you are in the process. Kind of to use your example because I’m a big Formula One fan, if you’ve ever been in office, yes. All the clearance stuff, everywhere. And so that’s a very important analogy for me, and then they use that is that okay, you’re going to open a barbecue restaurant down in trust, you’re really good at making barbecue. Grown up making barbecue. Your family’s always made barbecue and you’re an expert at making barbecue, you’re super at that. You are not an investor, you’re not a financial manager, you’re not an accountant. You’re not a marketing guy. You’re not a web guy, you’re not a legal guy. So the important thing to do is understand that you’re building a team around you. Your focus as a business owner is to do the thing of the business right? execute on what you do really, really well and understand what you don’t and then add an augment your business by by using these other professionals or other professional resources to help you execute on your goal of running that business. So the analogy there would be your driver is your business owner. They’re really good at driving, I don’t expect the driver to understand the tire pressures or how the engine is engineered or the the content of the fuel or oils that they’re putting into the engine. They have people that do that they’re really good at those things come to your point. And so if you’re having if you’re new business owner, if you’re starting something, you got something coming up from scratch, I think a very important thing to do is have a conversation with an attorney or sit down with somebody and get to know what they do, what types of businesses have they worked with in the past? Do they have any familiarity with those businesses? Have they tackled those types of challenges before? And therefore do they have some type of fluency? in the area that you’re going in? You know, if you’re doing distillery stuff, have you worked with a distillery before? Have you done that type of stuff? Because it’s a whole separate set of licensing? Have you done transportation? Have you done marine watercraft stuff, you know, some of these businesses and some of these industries, and some of these spaces have very unique and peculiar requirements. So that’s the first off, but I would also point out and then always try to make this very clear. And I do this in my my initial console calls now, with with potential clients in counterparties is not every lawyer is right for every person, not every accountants, right. For every person, not every planner is right, for every person, or every business or every need, you have personality issues, you have professional competency and strong points and certain other areas, maybe that fits, maybe it doesn’t, maybe that’s somewhere you’re going to work well together with, maybe it’s somebody you’re not, and that’s okay. You don’t have to go, Well, this guy’s the best business lawyer, we’re going to go with him, or this guy’s the best, you know, estate planning lawyer, we’re going to go with him. Because that’s what my cousin Joe said, or I read this review online or whatever. It’s not always that simple. That’s where it goes to that relationship word again, you’ve got to be able to work with that person. And so a lot of people misunderstand is that when when I’m meeting with a client, the client is not just interviewing me to see if I’m going to be a good lawyer for them. I’m interviewing the client, is this going to be a good productive relationship for me? Because if you have the most lucrative file in the world, but if you don’t get along, it’s gonna be a toxic relationship, and it’s not going to go anywhere. We’ve all made that mistake. No, No, we haven’t. No. And that’s, that’s part of learning it. And to your point earlier, you know, it’s part of running a business and being a business owner is being able to have these conversations with our clients. And we can learn from them, and they can learn from us. And so, you know, I’ve learned a lot of lesson for my business helping clients through some of their challenges, right. And I’ve helped clients avoid challenges because of lessons that I’ve learned sometimes the hard way, in, in, in my business. And so I think we’ve known that formation stage, it’s, you have the very obvious questions of what type of entity is best for, you know, what if I do this? What if I do that? What type of structure is most advantageous? What am I going to get the benefits? what’s what’s the kind of the plus delta on that? What type of contracts or agreements Do I need to have in place? What kind of licenses do I need? Are you aware of the kinds of licenses that I need? Do you understand the space that I want to operate in? You know, is it something that’s specialized? This is something that’s is fairly standard? Do you have any fluency and competency in that particular type of industry? Third one is,
Trey Nantz 23:30
you know, intellectual property, is this something that I’m going to run afoul of? And I formed this business, and I call it you know, Coca Cola, South Carolina, am I going to get a letter probably, you know, being aware of what you’re doing is a lawyer is going to have a conversation, a discussion, not just listen and execute, you know, that we’re not robots, and we shouldn’t be robots. So to your earlier point of, you know, Google and the liberation of data would call it that way, you know, anybody can find anything. And for a long, long time, lawyers as a profession had a monopoly on information, because it was locked up in leather bound books and law libraries that only lawyers would have any reason to buy and keep in their office. So you walk into their conference room and you see this massive library of books with all the supplemental updates of all the case law on all the statutes and all the stuff in there, they always had access to that. That’s just not the case anymore. As you said, anybody can look anything up anytime. What our job is, and our responsibility as professions and my job is, specifically as a business lawyer that advises new and current running businesses is how do you apply the laws, the requirements, the regulations, how do you navigate that to that client’s specific situation that requires a level of engagement by the attorney that requires a level of conversation that requires a level of understanding of what that business is who that business owner is and what their needs are for may be. So sometimes a lot of people just don’t know the questions to ask. You know, this is something that we do every day, it’s not something everybody does every day. And so our responsibility is to get to know that client get to know that business and help guide them through it. It’s so it’s very much a dialogue, it’s a discussion, I think that’s the first thing you need to look for. If you’re not getting that, hey, go LegalZoom. And you can hire somebody like me to fix the mess later, I’m happy to do that. It just gets a lot more expensive to untangle the knot before you have to retire.
Michael Baker 25:33
That’s a great point, man. I’m sorry to cut you off. But you mentioned that earlier, you made the comment about fixing something on the back end. And so I wanted to interject, because I think sometimes one of the initial reasons that people justify not talking to a financial adviser, not talking to a CPA, not talking to an attorney, is because they have in their mind, there’s going to be a cost attached to that. And, you know, hey, I’m, you know, I’ll deal with that later. You know, I don’t need that right now. I mean, I’m not gonna, you know, I’m bootstrapping this thing, whatever, whatever. Logical justification we give. But the idea is like, I don’t want you know, I don’t want to keep the upfront costs under control. But then, when things go south, especially from a legal standpoint, and then you have to go into triage, where you do bring in an attorney, it often ends up being even more expensive. What would you would you? Would you agree with that, or no, significantly, significantly, you know, in us start a business or start a business, I think we both understand that anybody that’s been in business gets that. There’s, there’s fixed costs, there’s a fixed budget that you have dollars are precious, especially on the first part of the business, when you’re getting everything going, you’re trying to get it off the ground. And so I would kind of respond to that. It’s it’s not a question, use the word cost. And I think a better word is value. You know, and I think that’s to your other question, what some things to have conversations about with with other practitioners, I think that’s one of them. It’s like, Hey, I’m looking for a relationship. I want to fixed budget, I would love to do the works. But I don’t know that we can do that now, is there something we can do to accommodate that, because I value your service, value, your expertise, I want your relationship and I want your help. And I can’t afford to pay all of it upfront, whatever that cost is going to be. So I think having that conversation don’t don’t go and try to negotiate things down, you know, your, your time has value, my time has value, right? facial has value, and the value is the word there, it’s okay is $1,000 up front, to form a proper business with your business partner that has bastow provisions. Right? That’s doesn’t always a lot of money. It’s a lot less money than a $10,000 litigation bill, when things go wrong in the business that you downloaded a form with. And also, you’re now getting a business divorce from your former best friend, comm business partner. And you’re just you’re fighting over the assets of the business. And now the lawyers are gonna make more on the litigation, the business is actually worth that’s an actual example. Yes, that we deal with. And it wasn’t a client that I helped on the front end, it’s somebody that I had to help deal with on the back end. And so, yeah, you’re looking at, you know, from from a relatively small legal bill to a, a open ended relationship of two to three years, and a very, very extensive litigation, you know, and then, you know, in addition to what you have to give up to unwind the business. So, poor planning costs a lot more than planning in advance. So anything, there’s without question, I don’t think there’s, there’s there’s, there’s there’s any doubt that making sure that things are done right, the first time avoids duplication of effort on the back end of it, you can’t miss targets fast enough to win. Right? So matter. I’m thinking about what you just said, you know, poor, poor, about poor planning. And you know, that was one of the very first things you said is sit down and create a plan. And one of the reasons why I think that that is such a crucial step is because aside from my business owners that decide you know, that they’re going to be so proper, whatever, there’s, there’s multiple, there’s so many just different types of business relationships and how companies come to be or how they evolve over time. And I often, you know, these are one of these lessons that sometimes you learn the hard way, and if you’re lucky, they don’t damage you, but it’s There is, you know, a lot of partnerships. And I’ll speak specifically to partnerships. A lot of partnerships begin with the greatest of intentions, it’s a group of friends, it may be some family members, and they have a great idea. And they’re going to go into business together, and it’s going to be wonderful, they’re gonna make a lot of money, and be able to provide for themselves and their loved ones, it’s gonna be wonderful. And we kind of gloss over the business side of things, because of the relationship side of things. How would you encourage people to say, listen, just because you want to get things set up and structured the right way, from a business standpoint, it doesn’t make you less of a friend or less of a relative, you’re simply protecting yourselves, all of the parties involved in case things go south, because it does happen. Money makes people do weird stuff. And that includes business.
Trey Nantz 30:59
A mix of weird stuff to correct. I think, you know, the best time to have hard conversations when everybody’s happy. On the front end of it, you know, everybody thinks is going to be great, you run that white with a wave of optimism, hey, let’s put this down so that we don’t forget it. It’s for everybody’s benefit. So usually the person that brings up conversation things your point is, you know, what are you looking to get out of this, nothing, I’m looking to protect me and you and the business, and our customers. And our vendors, it gets predictability in prevents that. That amnesia creep, that sometimes happens when things start to go a little sideways. I think that’s just a wise thing to do. Because if you’re not writing, it doesn’t exist, you have all the handshake agreements in the world. But I think if you’re going to do it as a business, you need to execute on it as a business. It’s not a hobby, right? It’s not a family project, it’s not a, a thing we’re doing for fun, we’re going into this, we’re going to go into business, for the purposes of making money, there’s going to be consequences from that, hopefully, it’s profit. And we have to pay a lot of taxes because we make a lot of profit. But we have to know how to allocate that if we’re going to do it, you need to do it professionally. If you don’t do it professionally, don’t have that intention. Don’t do it. That’s not a business partner you want to go with, I think that’s the first red flag if you have a conversation, being family members, which I don’t recommend, but if the family members or friends or business partners, professional associates, if you’re going to go into a venture together, partnership or otherwise, in your in your going to be transacting business together. it would behoove both of you to have an awareness of executing professionally and getting it done correctly. If the business partner that you’re looking to go in with his is resistant to that, you need to ask questions on why? Because if they don’t have clarity of mind and foresight to understand that it’s for everybody’s benefit, is that really somebody you need to go in business with? I mean, that’s the first hard question you’re going to have to ask. And that’s, that’s part of being a business owner, the definition of entrepreneur is one who bears all risk, right? You’ve got to manage that. And maybe managing that as maybe this isn’t the best person to partner with.
Michael Baker 33:28
I agree. I agree with that. And the I would just add one, one small slice to that as well. I think sometimes people get presented with business opportunities. And like, here’s the contract, here’s the paperwork, sign the paperwork, I would always encourage anybody that’s being offered an opportunity to be involved in business or join a business where you’re, you know, signing something, to have someone who represents you legally, to look over that paperwork, simply because for that reason, like you just want to make sure that you’re doing your proper due diligence, because you’re going into business with these people. And like you said, if they are everything’s on the up and up, and it’s all for everyone’s benefit, if they push back and want to know why you want someone to look over the documents, that to me is always a red flag. It’s always a red flag. Because as as I have learned over the years, and most people who may not know this, I see this word thrown around on social media a lot. But one of the things that I have learned is you really people don’t necessarily need a reason to sue you. They they consume you just because they want to. Now again, they have to find, you know, a legal representative that’s willing to push the paperwork and that may be challenging, but we do live in an age where people can be can be sued and One of the reasons why I’m thinking about all of this due diligence on the front end, because you are going to have, you know, exposures, if you’re in business, it’s just it’s going to happen, it’s going to be how you manage those, how do you mitigate those how to, you know, protect yourself. And then if you have business partners, each partner is like another vector of attack. So, you know, let’s, let’s think, you know, hey, we got, you know, three little pigs in CO. Well, you know, the first two little pigs went out did crazy stuff. And what did they do, they ran back to the third little pig, who had the house made of bricks, and where did the wolf come, he came to the house made of bricks. And so, you know, I look at that analogy is like, when you have business partners out there, you know, most most of the time when you have a partner, you know, multiple partners, a lot of people have their own lane, they have their their specialty, you know, and it’s very, you know, that you try to, like, not have too much overlap, but something that develops over on one side of the business can easily bleed into and affect everything else. And you want to make sure that you’re covered from a legal standpoint for that. And I think that’s an area that a lot of people overlook, just just in the sake of wanting to get up and get started. And I think that, you know, one of the things that, I always try to encourage business owners, or anybody that’s had a significant event, even if it’s been, you know, a life changing event is don’t be, you know, be quick, but don’t be in a hurry, you know, because sometimes when you’re in a hurry, things get overlooked, or they get missed, and then that comes back to bite you later on down the road.
Trey Nantz 36:40
Yes, no 100% in, you know, people tend to fixate kind of carrying on your I don’t know, where I came up with the three little pigs that just popped in my head while I was talking, and I know it that we go with it is people tend to focus on the when you have a partnership, it’s three little pigs, you know, the the, the the personal dynamic, and the personal risk of relationship, and then you have operating risk of the risk of running a business in your day to day, you know, but you also have these risks to the business, slip involved, customers, competitors that want to sue, right, that’s going to be inbound to the business, you have partners, you also have to worry about inbound from the partner side. And so if you don’t have properly draft documents, for example, you don’t have a clear understanding of liability. And in the separations on those and you you haven’t had kind of a brief with your business partners about what that looks like. No, it’s possible for a business partner and john smith is the littlest of the three bigs he gets, goes out and do something absolutely stupid in you know, gets in a car wreck in 18 people die, and they all sue him personally because he’s Apple, well, son, as well, what’s his that’s what’s among his assets is among his assets is this third interest in and three little pigs COVID. And that’s where X amount of dollars, all sudden, you have another 18 business partners, because he just lost his ownership and lawsuit because you didn’t have it properly drafted. And you didn’t have proper protections in place. So there’s, there’s there’s risks that you get, not only from the operating of the business, but there’s risks that you get from, from the partnership in the ownership as well. So you’ve got to manage risks in both directions, and be aware of those that’s just being a good survey of the battlespace that you’re operating in being aware of what’s happening on your flanks not just what you’re doing in the business, but understand what’s happening, you know, here and there. And with your partners, and that’s that, that’s another reason to have those conversations on the front end, when you’re doing your planning area, and everything’s optimistic, and everything’s great and wonderful. Put it in place, then, because the consequences could be. And it’s not trying to scare anybody, but the consequences could be fairly catastrophic from not just that business partner, but the business itself. And so that’s why you need to be very aware of the type of entity that you’re choosing, not just Oh, just file an LLC, the type of entity, the structure, the entity, the way the entities operating in the bylaws or operating agreements, what the rights duties and obligations and limitations on partners are, those are all conversations you need to have. And you need to have those in a guided way to somebody that understands that. That’s, that’s our office or other providers, there’s a lot of very good ones. Now, just because you started a business, to kind of take it to the next level. All the planning is well and good when you’re when you’re forming the business. Just because you’ve already started a business or maybe you have a current business or maybe you’ve acquired something. Maybe you’ve been in family business for a while. You know, we should have had these conversations, but we didn’t. It’s not too late, you can do that still you can there’s, there’s, there’s still things you could do, there’s still things you can fix. And that’s what we call in our practice, we offer what’s called a legal audit. So we’ll come in, we’ll have a conversation with the stakeholders, we’ll have conversation with the ownership, we’ll look at the documents that you have that may not have, you know, look at your tax forms, look at what you’ve got, and say, Okay, these are your areas of deficiency, these are the recommended points of improvement, these are the next steps that you do. And these are the costs associated with that. And so kind of give you a red, yellow, green, you know, his levels of severity of what we need to fix, like, Okay, well, you don’t have operating read it at all, that’s a red thing, you need to fix that just falling state, that’s cool. That’s the first step, you’ve got to make these other things and put them in place. If you don’t have that, you got to fix that right away, we can help you to do that, you know, or battles or resolutions of authority or incumbency certificates. You know, you don’t have a tax id because you’re doing a sole proprietorship, or you’re in a space on a handshake, but you don’t have a lease, or, you know, whatever. There’s a litany of just really bizarre things that we do see from time to time. But that having that sit down, really guard, whether regardless, if you’re a new business, or an existing business, the conversations are going to be effectively the same as just putting in a plan to execute or if you’re already in the middle of it, putting in a plan to remedy. No, I was thinking while you were while you’re speaking, when you talked about having a plan audit, or excuse me a business, you know, audit, or legal audit.
Trey Nantz 41:41
That word scares a lot of people. But really what that’s all, you know, because it has a negative connotation. I think a lot of people, you know, they, they mentally link it to the IRS, but Well, this is what you’re specifically talking about, to the business owners, hey, you’re doing something proactive, you’re not doing something that’s reactive, you’re saying, hey, we’ve been kind of running at this clip for a while. Let’s let’s find out, like if we’ve got some just unknowns, or some things that we don’t even know, that exists that could that could really bite us. And and I think that goes back to having these people on your team. Because there are times when, you know, an attorney will come in, and they’ll ask you questions, and it’ll be things that you’ve never even considered. And you know, you know, and that’s the point of it. Like, you know, we talked earlier about the guy who’s in Charleston and makes the best barbecue ever. Like, clearly, there’s a skill set there that sets them apart that they can make, you know, world class barbecue. Rare will it be to find somebody that makes world class barbecue, and also going to have a world class legal mind when it comes to business, because you’ve been devoting your time ever. You know, if you find that person, there, there might be a niche business opportunity for them. Yeah, you can have barbecue while we while we discuss your contracts. But what are some of the things that you you know, commonly uncover in some of these legal audits, just stuff that people just don’t think about that all of a sudden, you’re like, yep, here’s, you know, here’s another one today. I mean, there’s got to be a few, right?
Trey Nantz 43:19
The biggest thing that we that we see is something you mentioned earlier, somebody bringing the documents in, you sign it, and you don’t read it, you don’t take it to somebody. And asking is sometimes a red flag, which pointed out I think, the biggest one of the most common things that we see, as people that signed contracts or sign agreements are signed leases, sign, whatever legal agreement is more call it, they just signed, they have no idea what’s in it. They don’t read it, they don’t understand it, they don’t necessarily have the capacity those days. Because again, that’s not what they do. It can be very technical. There’s a lot of defined words that have their terms of art that have very specific meanings in those contexts. And, you know, a lot of times you see people that like, Oh, it’s just a five year lease, yes, no problem. You’re also responsible for the full five year lease personally. Do you understand that? No, they never bought reading. And so, you know, we didn’t have to have a conversation, one, informing them and making sure they understand that they’re personally on the hook for a commercial space for five years. Yeah. And that tends to get all the color out of their face, and they realize that’s a bigger, large amount of money. $5,000 Yeah, cuz, you know, their, their thinking is probably well, that’s great. But if my business goes out of business, oh, well, business doesn’t exist. So you know, default on the lease and, you know, go on about my luck and go on about my life and like, No, no, no, actually, you won’t go on about your life because you are still on the hook, whether the business succeeds or fails. I think that’s a huge thing that people need to consider is personal guarantees.
44:54
Well, understanding to going from that understanding what you’re signing Are you are you doing something that you understand what you’re doing? If you don’t understand, don’t do it. Understand it first look, before you leave, that’s, that’s the most important thing. The next most common thing that we see, we see this a lot, both on real estate style houses, business of houses, is not having any documents at all, or they downloaded something that’s grossly inadequate online, and now they’re trying to sell something, either sell an asset of the business or selling a piece of real estate out of business name. And there’s no extra cost your Articles of Incorporation and your Articles of Organization are not going to list the shareholders or the owners, at least in this day. So just about pulling the certificate of existence and pulling the articles in possession doesn’t tell me as an attorney, representing the buyer, from an asset of your company, whether or not you even have authority to do that. And so now you’re stuck in a situation where you’re engaged in a contract to sell something, there are consequences to that contract, especially if it doesn’t get performed, those consequences can be get rather expensive, depending on the nature of the contract with the asset. But you don’t have any proof of authority to show that you can actually do what you’re trying to do. Because you have no documentation that’s in place at the time of the formation that shows that that you can do this. Or even if you are in a in an operating agreement or a partnership agreement, this is okay. What does that require the consent of the other owners? You know, are there other stakeholders that have an interest in you know, if you don’t have it in writing, and you don’t have those things agreed upon those things in place, then there’s no proof that you can actually act. So that’s, that’s something we have to remedy a lot is putting into place in establishing operating agreements kind of after the fact retroactively or doing incumbency certificate after the fact says, okay, yes, Joe has the ability to sign for Joe. And Joe, just because it’s got your name on, it doesn’t mean that you have the authority to do that, necessarily. So that’s something that we tackle quite a bit. So this the absence of documentation, or documentation is executed without any understanding or awareness whatsoever, those are the two biggest challenges that we see with our current business clients.
47:20
Yeah, and I can imagine that sometimes, if you’ve been going for a while and not had the right documentation, something that you might would have been easy for everyone to come to agreement to, at the inception may be a little more difficult, you know, as as you know, gone down the road a little bit. One, I’m going to pivot for us real quick, because I’m looking at our time, and I wanted to make sure I asked you about this, because the nature of business is really changing a lot, you know, some things, you know, will will always be present, but one of the things that we’re starting to see more and more, at least I am, is the idea of developing like your own proprietary process, or developing your own, you know, content or something that you would refer to like intellectual property, your training methods, whatever, it is something that can set you apart in the marketplace. How can business owners, you know, protect themselves, let’s say something, you know, you know, Joe’s got the famous idea, or he’s got this process that really sets him apart from his competition, but it’s proprietary, it’s a lot of his intellectual property, his intellectual capital that’s gone into that, how can you know, Joe protect himself from someone who comes in, learns all his secrets, and then just goes down the street and opens up, you know, Jim’s, you know, shop and does everything that Joe does, but we’ll do it for $1 less so that, you know, he can undercut Joe,
48:51
I think you solve that in a couple of ways in you know, without getting way too specific in the weeds on kind of the employment contract. And in vitro agreements that you have with people that you work with and non disclosures, things that he stuff that is that proprietary stuff does need to be safeguard your trade secret type things, there are contracts you can put the place on the front end, again, the planning part of it, there are contracts and agreements that you can put in place on the front end with employees or vendors alike, that that would prevent disclosures or use of those trade secrets or that employee from going on or going on and kind of replicating the process and doing it for $1 less. I think another thing that you need to be aware of and this is part of that conversation with your business, your your attorney, or your professional. is okay. Is this something that is protectable? Is it patentable or copyright or is it trademark? Maybe it is maybe it isn’t? Is there value in doing if you’re a marketing heavy business in the service industry, Now your your brand your name is is a value that’s an asset, maybe that’s your most expensive asset, that’s your most valuable asset. You know that what you do is just the service, you don’t have any inventory. But what you’re what you’re the power of your brand is what drives your customer flow. Right? So how do you protect that? In? Do you know how to protect that? Is there a way are you duplicating something that somebody else has done? That’s another thing is that just because you have a really good idea in South Carolina doesn’t necessarily mean that somebody is not doing the same thing or very similar name in Texas or California. We’ve seen that with primarily restaurant clients of ours, that have opened up shop and somebody had a national revenue for trademark, but they never bothered looking that up. And they formed sad beliefs. And so one of the things we have to clean up as well, we can either negotiate a license for use for changing, you know, at that point, how do we fix the problem and mitigate the damage? Because there’s going to be damage, which Yeah,
51:00
that scenario, who that’s some heartburn right there thinking that you got it squared away, and then you realize, you know, some group in Kansas had owns the rights to that, you know, situation, I have one other thing because we I think we’ve covered a nice, we’ve had a nice journey from the beginning of business, where, you know, it’s so important to sit down, have conversations, do some planning on the front end, sketch out your ideas, look at things from, you know, 30,000 foot view and drill down into what’s you know, needs to happen, then there’s, you know, you’ve been running the business, having a legal audit, looking at things from a perspective, like, hey, maybe there’s something we’ve missed, maybe we started this thing out, or I started this business out, and I didn’t really do all of my due diligence from a legal standpoint. And then, you know, not to be morbid, but you know, we’re all mortal, something happens. You know, sometimes life, you know, happens unexpectedly, you get eaten by a T Rex, or something. And then all of a sudden, you know, there’s the business succession plan, or the business, you know, changing ownership. You mentioned a few moments ago, one of your, one of the business partners, you know, has an accident. And now all of a sudden, you have 18 new people who have a stake in your business. Another way that a lot of businesses will mitigate things like this, especially things you can plan for are through buy sell agreements, we speak just a few minutes on like a buy, sell agreement, tell people what that is, and how important that is for businesses, especial multiple partners in a business to get that squared away, and how that can save them a ton of heartburn down the road?
Trey Nantz 52:40
Well, and I think that’s something that you would have first, you’d have, minimally something very basic in your operating room or bylaws about what the disposition future disposition of those shares are, or membership interests, the business would be like, if it’s a solely owned business, and you’re the only person in charge, what happens to your business, when you pass? What is your exit strategy? What is your succession plan, and that’s a part of a conversation that needs to marry up and be a part of a broader estate planning conversation. But if you’re not having those two conversations in tandem, you’re not having the conversations appropriately. Because those things are irrevocably linked, you have to have a conversation about personal plans together with your ownership of those shares. Because while they can happen independent, that’s you, you’re looking for a very expensive litigation delegate, but not getting that done. If you have other business partners, it’s always a recommendation to have a separate standalone, celebrate all that is, is very basic form is a laid out formula, and process by which if a member chooses to leave the company, voluntarily or involuntarily, or that can be death, because that’s fairly involuntary. So if a member or an owner is leaving the company, under whatever circumstances and you can define those circumstances and categories, this, you know, this formula is going to be applied to this bio, or this insurance is going to cover that this asset is going to be exchanged for this and what you’re laying out very clearly, the formula and method by which a member can separate from the enterprise. It’s very beginning, at the very beginning of our conversation, understanding the abstract concept of a business being a separate person, in and of itself, and the owner or owners being part of that. It’s not one of the same. And so the business is going to continue, despite if you have a member no longer associated, or if you have all the members disassociating you have an entirely new ownership. Maybe you’ve sold it, maybe you’ve built this really great barbecue business, you know, sell to investors. That’s cool. The business is going to continue. How does it continue and how do you extract your value? How do you how do you get out of that? So a buy sell agreement is just a very basic appointment, let’s have a separate agreement either, again, in the simple form in your operating agreement or really as required as a standalone agreement to kind of augment your operating models that outlines the method and manner by which the member or members leave the company. And at what value, they leave the company that way. There’s no discussion, there’s no argument, there’s no misunderstanding about who is owed what.
Michael Baker 55:26
That’s great man and, and the more I was listening to you, the more I kept going back to how much easier all of that would be doing it on the front end, versus trying to do that in real time, as you’re going through some type of event or, you know, when you’ve been when you realize something’s now coming down the pike and emotions are high or elevated stress is high and elevated the negative relationship, you know, I’ve showed up and done all the work and you’ve not done it. So yeah, you’re a 50% owner, you’re not really entitled, I did all the work. And that, that gets business divorces are sometimes worse and more expensive than regular divorces.
Michael Baker 56:11
No question about that? Well, we are right up on the hour. And this has been a great conversation, man that so much, so much to unpack, it’s really impossible to try to touch all the things that would be pertinent or relevant for business owners within an hour. But hopefully, anyone that’s been listening or chooses to watch this webinar, first of all, thank you for Thank you for watching. And secondly, please know that like, a lot of this stuff is not meant to be intimidating. This is just the world of business. And it’s it’s vast, and, you know, part of having the right team in place is all of those pieces are there so that you can go out and create the best business you possibly can that you can maximize your efforts, not worry about the stuff that isn’t in your wheelhouse that’s not in your specialty. And so that you know, more and more people pulling in the same direction is only for the ultimate goal. The ultimate goal, I guess I should say is that for the ultimate benefit of the business owner, and anyone that’s going to be a beneficiary of that ownership. So with that, you know, Trey, please tell anyone you know how to find you how they can connect up with you. What’s the best way to reach you? Let them have it in case they want to reach out.
Trey Nantz 57:31
Or here you can get us on the web is this, www.nantz.law. Or,want to do a dot com, you can find us at www.cjnlaw.com. We have a Facebook and Instagram @NantzLawFirm. Get us on Twitter. We’re pretty much all over the place there. Think on LinkedIn to get photos off at all hours with the with the instant the Facebook in the and the and the Twitter course you can always email us off the website form.
Michael Baker 58:10
Awesome. Hey, buddy this was wonderful. Thank you so much, for I know how busy you are right now. So, thank you for taking an hour of your time and just chopping it up with us and me. We’ll have a coffee break together one day soon. All right. Good to see you