Category Archives: Small Business

News and thoughts on Connecticut small business.

Starting A Law Firm: How To Open Bank Accounts

I have always been afraid of banks. ~ Andrew Jackson

The first time I experienced how difficult starting a law firm is happened in a bank. Actually it happened in a bank for four and a half hours. And then in another bank for another four hours.

Our first bank gave me a Real Estate Brokers Account. We are not real estate brokers. They also promised that checks were free. They then charged us $100 from checks and took the money out of our IOLTA account (which didn’t have any money in it). This caused the IOLTA account to be overdrawn. At 5:30 on a Friday morning I was sending an email to the Statewide Grievance Committee explaining what had happened. After several phone calls with the bank, they corrected their mistake. We switched banks a month later.

Dealing with banks taught me the first law of managing a firm: Everything takes forever.

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Welcome to Bankland.

Pregame:

If you are starting a firm you’ll likely decide to form some sort of liability limiting entity (pick’em: LLC, LLP, PC. S-Corp). Before you can obtain a bank account for your entity you must first create the entity and properly register it with the Secretary of State. Then you must obtain a federal tax identification number from the IRS. You will need both of those things prior to walking into a bank.

You’re also going to need a firm juris number. You must get that number from the Statewide Grievance Committee.

Getting what you need to open your bank accounts can easily take two weeks. Plan for this.

Gametime:

First you’re going to need to bring money to the bank. Banks have minimum deposits required to open accounts. Find out what that amount is and make sure you have it. Also make sure you have at least two forms of identification (e.g. driver’s license and passport) and a certified copy of your articles of organization.

At a minimum you are going to need two accounts. Your first account is your operating account. The second account is your client’s trust account (IOLTA). You should get different colored checks for each account. One cannot violate the first rule of attorney ethics: Thy client’s funds account is sacred. You can’t violate that by mistake. You can’t violate that even for one second.

On the advise of a very wise law firm bookkeeper, we optedy for a second IOLTA account. We use our second IOLTA account solely for real estate transactions. In real estate transactions, large amounts of money come into the account for very brief periods of time. Having a second account solely for real estate makes reconciling our normal IOLTA account easier. We use green checks for our real estate trust account. Green for grass. The kind you mow.

Extra Points:

Strongly consider getting a credit card with a small limit. Our bank was willing to open small credit accounts in the name of our business. We use these cards to pay all of our monthly subscriptions and for firm expenses. It is an accounting efficiency for us. We look at our credit card statements and then make entries into quickbooks. This allows us to write one check a month for the majority of our expenses.

A small limit will also help you live within your means.  Early in your business life cycle it may be tempting to lean on the card heavily. A small limit on a credit card that you can pay off every month is perfect. You can also earn points.

We love our mobile banking. We’re able to deposit checks to our operating accounts directly from our phones. This saves us trips to the bank. Really investigate your bank’s mobile and online features. Depositing checks without having to go to a bank saves time.

Post Game Analysis: 

Your bank, your bank accounts, and the ways in which you interact with your bank are critical to your existence as a law firm. Ask lawyers in your area what bank they use and if they are happy with their bank.

And plan to be in the bank for four hours. And if you are forming a partnership – it’s likely all of the partners must be at the bank – likely for four hours. That’s after it’s taken you two weeks to form your entity, get your tax id, and obtain a firm juris number.

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McKeen Law Firm is a Glastonbury law firm that litigates difficult cases, closes real estate deals, and serves as trusted advisors to individuals and small businesses.

Make Connecticut More Business Friendly: Create A “Medium Claims Docket”

Over the next several days, I’m going to write a series of posts of improvements that I think should be made to Connecticut’s courts. The creation of a “medium claims” docket would help make Connecticut a more business friendly state.

Sometimes I advise small businesses to use the small claims system even though their debt may exceed the $5000 jurisdictional limit. For example, say a client is owed $5700. It is cheaper and faster to right off that $700 and proceed with a case in small claims court.

Right now I have a contested collections case between two business. The amount is approximately $20,000. The case was filed in July of 2010.  Pleadings were closed in early December of 2010. A pretrial was held yesterday and the matter was set down for trial in March of 2012. The case is simple. It’s at best a morning bench trial. It’s the kind of issue that’s resolved in small claims court in short order.  The delay and the uncertainty are bad for my client’s business.

The benefits of small claims court is that it’s usually fast. Trials are held months after a complaint is filed.  Pleadings and discovery are condensed. Win or lose the matter is usually resolved within about 6 months. My client would love nothing more than to have his day in court.

For many Connecticut small businesses problems can arise when debts are between $10,000 and $25,000. Those amounts are too high to write off and two low to engage in full scale litigation.

My proposal is to create a docket for claims arising out of breach of contract – a collections docket for disputes under $25,000.  More time could be saved by creating mandatory discovery and disclosure provisions in the practice book similar to those used in divorces and car accidents. Limiting pleadings or at least the time to file them would also help speed the process up. The judicial branch should guarantee bench trials within six months of the return date or at least target such a goal.

Providing businesses with certainty both in terms of process and time will help drive down the cost of doing business in the state. The judicial branch should consider creating a “medium claims” docket. Such a docket would help Connecticut small business.

Dear Denise Merrill

First, congratulations on being elected to serve as Connecticut’s Secretary of the State.

Denise Merrill

I listened to you on the campaign trail and I know you have ideas for the office. I’m asking you to start small.

Connecticut is widely considered to be unfriendly to business. Objective data indicates this has nothing to do with tax rates but you know that from your time in the legislature.

I accept the assertion that Connecticut is unfriendly to business.

Your office is on the frontlines of Connecticut’s business problem.

Here’s an example of what I’m writing about. I represent a client. Connecticut’s economy could use a million more people as industrious as my client.

He’s opening a hair salon in Vernon. He came to see me and we formed a LLC. We paid the expedited filing fee at the Secretary of the State’s office. Somehow the expedited filing ended up being mixed with the routine filings. It came back to me with a note on it.

The note informed me that because I had paid for expedited filing and the filing was not expedited that my money would be refunded. Instead of mailing me a refund check for $50 I was mailed a form.

The form, mind you, was not that complicated but I had to fill it out and mail it in with a copy of the cashed check (which I have to wait for).

In the private sector a refund check would have issued and that would have been that.

Please Ms. Merrill, in most cases your office will be the first office that business people deal with in our state. Use your tenure to improve the pace at which business is done in the state.

I have some more thoughts that I’ll post later this week on how you can do that.

The 2090 Calorie Friendly’s Caramel Cinnamon Swirl French Toast

by Ryan McKeen

Last year, I was indifferent while the CT Legislature debated requiring restaurants to disclose nutritional information to patrons.  Lazily, I bought the argument that people know that a bacon double cheeseburger is bad for them.

I figured the issue was worth revisiting here now that Congress has stepped in and passed federal legislation requiring restaurants with over 20 or more outlets to disclose calorie counts on menus. I’ve come around to fully supporting the measure and here’s why:

Everyone knows the Big Mac isn’t health food. It contains 576 calories without cheese. But it’s unfair to the Big Mac that it has become the poster food for the calorie disclosure debate. It’s nowhere close to Friendly’s Caramel Cinnamon Swirl French toast (hereinafter referred to as the “Friendly’s French Tort.”

The Friendly’s French Tort contains 2090 calories, 57 grams of fat, 374 grams of carbs, and 214 grams of sugar. That information comes right from Friendly’s website. Add another 110 calories if you’d like syrup with that.

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Click To Enlarge

Before reading that I knew the Friendly’s French Tort wasn’t a healthy option, but I had no idea just how bad it was. I exercise and watch what I eat. Nancy Clark’s  “Nutrition for Marathoners” is on my coffee table. If I were ordering at Friendly’s, I would have guessed the French Tort was somewhere around 900 calories — an unhealthy choice at that — but under the right circumstances, I could fit it into my diet as a “treat.”

To put things in some perspective, I’m training for a marathon.  I’ll need lots of fuel that comes in the form of calories to complete my 26.2-mile goal. Running  a marathon, however, would barely (if at all) burn the number of calories in the French Tort with some syrup and a glass of orange juice.

Another way of looking at it:  a stick of butter contains about 810 calories. The French Tort is more or less equal the calorie equivalent of 2.5 sticks of butter.  I never would have guessed that.

With the new legislation, having the calorie information will allow me to make a healthier choice at the point of sale and I think that’s a good thing.

New Connecticut Home Improvement Contractor Law

by Ryan C. McKeen

I’ve had two contractors at my home that have fully complied with the existing Connecticut Home Improvement Act. That’s two out of many.

The truth is that the Connecticut Home Improvement Act requires full compliance by contractors with its many provisions.

This past session, the legislature passed and Governor Rell has signed a law that requires contractors to provide homeowners with a written disclosure of any corporation, limited liability company, partnership, sole proprietorship or other legal entity, which is or has been a new home construction contractor under the provisions of this chapter or a home improvement contractor under the provisions of chapter 400, in which the owner or owners of the new home construction contractor providing the written notice required by this section are or have been a shareholder, member, partner or owner during the previous five years….Link.

Contractors can no longer go from Ryan’s Painting to Ryan’s Painting & Gutters, LLC, to Ryan’s AAA Painting, Inc. to Ryan’s Paint, LLC in a span of a few years without informing consumers.

Of course contractors who engage in this practice probably don’t comply with other provisions of the home improvement act in the first place. In essence, this is just one more provision that contractors who didn’t comply won’t comply with.

Connecticut Superior Court Clarifies Mechanic’s Lien Statute Regarding Time Limit For Filing Of Lien

The following situation comes up more often then you think.

A contractor performs services. Several months later, a homeowner notices a defect and calls the contractor to repair the work that was done months ago. The contractor comes out and performs the work and there’s a billing dispute.

Under Connecticut law, a contractor must file a mechanic’s lien within 90 days of the last day he performed work on the job site or the contractor loses his lien rights.

In Cianci v. Original Works, LLC., Judge Shaban held that any services performed at the property owner’s request, even trivial services, restarts the 90 day time limit for filing a lien.

Prior to this holding, this issue was one of some debate between contractor’s and homeowners.

What does this mean?

I don’t think it means much. It’s always been my interpretation of the statute that this is the law. Of course, my interpretation doesn’t make for law and a judge’s opinion does. In my opinion, this is nothing more than a clarification of existing rights.

More Layoffs At The Hartford Courant

This is a law blog, so it’s reasonable to ask why I’m writing about layoffs of the Hartford Courant.

The Hartford Courant Alumni blog covers the carnage.

The reason is that our state needs professional journalists. We need them to investigate, to expose, to inform, and to challenge us.

The blogosphere can’t replace professional journalism – it can only help to keep them honest.

Our founding generation understood the significance of a free and vibrant press. The constitution of the Commonwealth of Massachusetts reads: “The liberty of the press is essential to the security of freedom in a state….”

I don’t know what the solution is but the dwindling numbers of professional journalists in Hartford is troubling.

Watch Your Credit Cards

Credit-card companies continue to raise customer interest rates and fees despite a record-low target rate from the Federal Reserve and billions of dollars in bailout money that has been pumped in to the financial companies. Fox Business News.

Rates are rising all over the place even for customers with good credit.

Reading about rates increasing over 300%.

These rate increases will significantly impact your CT small business clients who finance some of their business through the use of cards. 

Something, you may want to consider making your clients aware of.

 

Explaining (in Part) The Decrease In Business Start Ups In Connecticut for 2008

by Ryan McKeen 1/29/2009

Yet even that number, economists said, may be just a cloud. The total number of businesses to start in Connecticut last year — 27,483 — is still 11 percent lower than the number of those that started up in 2007. The data were released Wednesday by Secretary of the State Susan Bysiewicz. Hartford Courtant, 1/29/2009

The article quoted above details how unemployment doesn’t track business openings and closings data in Connecticut. If it did, we’d be in more trouble than we are now.

The increase in closures of businesses and the lack of new business filings is likely directly related to the real estate market.

For a number of reasons, investors incorporate when they purchase investment properties. These companies often do little other than hold title to real property.

Prior to the real estate bubble bursting,  a number of those investors borrowed heavily to purchase investment properties. When they couldn’t make payments, the properties were foreclosed and the company that was formed to hold the property no longer had a reason for existing. Hence, an increase in the number of dissolutions filed with the Secretary of State. Better to dissolve than pay the annual entity tax.

Why the decrease in the number of companies being created in Connecticut? Real estate investment has slowed. If investors aren’t buy properties then there’s no need to form a company related to the purchase of a property.

At least in part, the reason job losses don’t track corporate filings is that a lot of companies both created and dissolved in Connecticut do not have any employees.

Why Blawging Isn’t Enough

Blawging is a marketing tool but perhaps more accurately it should be part of a marketing strategy.

It is no surprise that the candidate who mastered the internet ended up being elected president. The internet is the most powerful medium and it’s becoming more powerful. At no point in human history is it easier to connect and communicate with each other.

For the under 30 demographic, if you aren’t online you don’t exist.

In terms of web traffic, this site does well or at least better than I thought possible. However, my traffic to call ratio is low. Ideally traffic should result in calls and calls should result clients. I’m working to change this.

My goal for the next year is to get more clients from clicks. In part I hope to continue to improve my content and keep upgrading this site.

It’s my assertion that one can spend all day on twitter, blogging, facebook, linked in, digg, myspace and do nothing but spend time on twitter, blogging, facebook, digg and myspace.

Now back to Barry. If you notice, Obama didn’t stop on the internet. He also had ground game.

The Obama forumla is: web presence + groundgame = votes clients.

Tomorrow, I’ll share my thoughts on ground game.