Aaron's Blog


Ohio Corporate Compliance Solicitation

Many Ohio corporations may receive an official looking solicitation from an entity that identifies itself as "Ohio Corporate Compliance."  The notice is addressed to the corporation and contains an official looking form with a deadline for reply, typically in a short period from the date of receipt. 

The notice purports to require a filing fee of $150 in order to process the corporation's annual minutes.  Although the Ohio Revised Code does require Ohio corporations to maintain minutes of meetings and certain other records annually, such minutes are to be kept in the records of the corporation; there is no requirement that corporate minutes be filed with the Secretary of State or any other governmental agency.

Although this notice is merely a solicitation for services and can largely be disregarded, it is important for all Ohio corporations, especially closely held and family owned corporations, to understand that there Ohio law does require certain formalities in order to preserve the limited liability protection afforded by the corporate structure.  In the event the legal requirements of corporate existence are ignored, a creditor could attempt to pierce the corporate veil (i.e., obtain personal liability against the corporate shareholders) in the event of a claim against the corporation.

In the event you have failed to comply, or are unsure of the applicable laws related to maintaining the limited liability protection afforded by an Ohio corporation, you should consult with your corporate attorney for details.  In the event you do not have a corporate attorney, feel free to contact us for more information.

This notice is merely a solicitation by Ohio Corporate Compliance in an effort to prepare the annual minutes for the corporation for the fee of $150.  However, it would be impossible for this entity to prepare all of the minutes that may be necessary for a given corporation based on the limited information requested on the form.

Posted by Aaron Harrison on December 30th, 2010    0 comments
Foreclosure Alternatives and Prevention

Due to a staggering economic slowdown and historic unemployment, many Ohio families are in a position where they are behind in their mortgage payments, or in some situations facing the very real possibility of a foreclosure action against them.

When faced with a foreclosure, or the threat of foreclosure, borrowers are typically overwhelmed by the prospect of losing their home and incorrectly conclude that there are no options available to resolve the issue with the mortgage company.  This common mistaken belief is compounded by the fact that the borrowers rarely qualify to re-finance the obligation with a third party (due to the damage that has been done to their credit leading up to the foreclosure) and are almost always unable to pay off the mortgage in full.

In light of these options, borrowers will sometimes adopt an “ostrich defense” in which they ignore the proceedings altogether.  This allows the mortgage company to obtain a default judgment against the borrower and shortly thereafter to schedule a judicial sale of the real estate.  At the point that an order of sale is issued by the court, borrowers have no option but to pursue bankruptcy relief to protect their home.  In the process, irreparable damage is done to the borrower’s credit even when the borrower is current with their other obligations.

However, many alternatives to bankruptcy are available to borrowers who take the initiative to work out a solution with the mortgage company when falling behind in their payments, even after a complaint is filed in a foreclosure action.  Mortgage companies are generally willing to negotiate alternatives rather than move forward with a judicial sale that generates more costs to the mortgage company.

Loan modifications and short sales are just two examples of many solutions that a borrower working with a mortgage company can pursue.  In addition to solving this situation privately, there are also many public alternatives available such as Legal Aid associations and the Save the Dream Foundation.

If you need to respond to a foreclosure action, or are behind in your mortgage obligations, feel free to contact us to discuss your alternatives and legal rights in detail.  Generally, taking a proactive approach will yield a better long-term result.

Posted by Aaron Harrison on February 11th, 2010    0 comments
Collection Strategies for a Sluggish Economy

Most business owners are feeling the credit crunch that is a result of the current economic crisis across the country.  It is rare that I speak with a business owner who is not dealing with customers who are seeking to extend their credit terms, or are outside of them altogether. 

Some companies have their own difficulty with their payables due to the slow payments received from customers.  The hesitance of lenders to extend operating lines of credit to many businesses during this period further compounds the problems that small businesses face when trying to cash flow their operations.  This may result in missed opportunities for growth or expansion due to the fact that cash is at a premium.

It is easy to reiterate the situation that many business owners are facing today.  What is difficult is identifying solutions.  However, there are some strategies that can be employed to assist a business in minimizing receivable issues in the first place, and maximizing their success in collecting them in the event it becomes necessary. 

A Brief Word about Security

Depending on your type of business, there may be certain opportunities to retain a security interest against your customer’s assets in order to ensure payment.  Security in a debtor’s property grants the creditor an interest in an asset of the debtor until the payment is received. 

Formal security interests can take various forms, including but not limited to purchase money security interests in goods purchased on credit, or mechanics’ liens against assets where repairs or improvements were made to the asset.  Even where a creditor does not have the ability to retain a formal interest authorized by law, there may be informal alternatives to consider, such as taking deposits to cover a bulk of the work, or requiring payment at some point prior to the completion of the services, or delivery of the goods to the debtor.

Having a security interest is a valuable tool when dealing with a debtor in significant financial distress.  However, it is not practical to retain a security interest sufficient to protect the creditor in every foreseeable situation, and as such, the tips included in this article are focused on collecting unsecured obligations, which is the reality facing a vast majority of business owners today.

1.  Establish consequences for Late Payments. 

If your purchase agreement or invoice merely states a price and the payment terms, it is easy for a customer in a cash crunch to let it sit at the bottom of the stack under credit cards and other bills that have significant consequences for late payment.  At the time you are discussing pricing with the customer you should advise them of your late payment policy.  A simple monthly interest calculation or a flat fee of 10-15% will typically suffice.  Alternatively, you can offer a discount for bills paid early or on time. 

If nothing else, addressing this up front with the customer will give you some insight into the customer’s payment habits.  A customer preoccupied with negotiating the terms or penalties may have some experience in not paying their bills on time.  Don’t feel compelled to limit this strategy to new customers, either. 

Implementing a company-wide policy regarding late payments may prove to be worthwhile, even though it may be initially resisted by some long term customers.  If the specific circumstances warrant it, you can always waive the penalties for such customers experiencing temporary setbacks.  In so doing, you are likely to gain more goodwill than you lost when implementing the policy in the first place.

2.  Develop Standard Procedures for Collection Efforts on Past Due Bills. 

Once the bills have gone out it is easy to forget about them and hope that the money will come rolling in.  But how do you address those customers who are not paying, or are taking their time paying for your goods or services?  Take some time to develop a straight forward and informal collection letter that can be used with your past due customer that indicates the amount due and the number of days the balance has been outstanding. 

Once you have prepared a draft letter, appoint someone in your office to prepare and send letters out to all customers who are over 30 days past due on a monthly (or more frequent) basis.  This simple step will avoid the common excuse that a customer forgot about the bill. 

For any in-house collections such as these, it is generally a good idea to remain cordial in order to preserve future opportunities with the customer.  This letter can be treated as a simple reminder to the customer of the payment terms, and the applicable late charges that will continue to accrue if payment is not made.  If the lack of payment was an honest mistake, you will find customers are eager to make it right.  However, this letter can also be a useful tool in staying ahead of the curve in identifying potential disputes or claims that a disgruntled customer may have.  The earlier such problems are identified and communicated, the more likely they are to be resolved informally, without the dispute escalating to future legal action.

3.  Formal Collection Proceedings

If the customer has ignored your payment reminders and has not communicated with you regarding a possible dispute (or if the customer takes an unreasonable position in communicating a dispute), then it is likely time to consult a professional regarding formal collections. 

You will want to identify the amounts due that are most likely to be collected before consulting a professional.  Although most undisputed invoices will be able to be turned into a judgment against the debtor, if the debtor does not have sufficient assets to satisfy the judgment, then it is not that valuable to you.  Likewise, the older a receivable is the less likely you will be able to collect it.  Therefore, if you can establish an ongoing relationship with an attorney to assist you in your collection efforts, you may enjoy better results than if you take all of your bad debts to an attorney annually and hope they will be able to collect some of them. 

If there are a number of receivables that you believe will be difficult to collect, you may elect to forward those to a collection firm that works on commissions.  However, you should be very particular in who you work with.  There are a number of reputable firms that do this, but there are perhaps a greater number of firms that utilize unethical and/or illegal collection practices and could potentially put your company in worse shape than if the debt wasn’t collected.

Finally, beware of the counterclaim.  This is good advice whenever you are considering legal action.  If a customer has advised you of a valid dispute regarding the good or service you provided, they may be eager for you to take them to court to try and collect on their bill, as it presents them with an opportunity to file a claim against you regarding their dispute.  Therefore, if their dispute is valid, you would be well advised to seek a release from them for their claim, in exchange for you releasing them from their obligation to pay.  If this is not feasible, then perhaps you should consider not filing the claim and instead wait to see if they file a claim first.  If they do, you can counterclaim for the balance due.

Once you have sorted through the collectible claims and met with an attorney, there are a number of different approaches that could be used to collect the debt.  Stay tuned for future entries further outlining these techniques.

Posted by Aaron Harrison on September 8th, 2009    0 comments
Starting a Business? Talk to a Professional First

“We do not offer tax or legal advice, we just make incorporation fast and simple”

This is a direct quote from a commercial I hear regularly on the radio.  While I can see how the concept of a cheap, quick and easy incorporation may be appealing to folks, especially in light of the current economic climate, I can’t fathom why anyone would rely on a website to assist in perhaps the most critical aspect of establishing a business when the advertisement expressly states that it will not provide any tax or legal advice. 

Tax and legal advice are the paramount factors when deciding to incorporate, form a limited liability company (“LLC”) or establish another entity with limited liability.

Easy ≠ Cheap

Many of these websites claim to be an inexpensive alternative to lawyers.  However, based on the real life experiences of some of my clients and colleagues, it seems unlikely that these websites offer such services at any discount from what a local lawyer would charge.  In one instance a client indicated that one of these “cost-saving” services would have charged him approximately four times my fee to establish an Ohio limited liability company.

Even if the price point were comparable, the service is clearly not.  Many people understand that creating a limited liability entity is necessary to avoid the personal liability that is associated with operating a business these days.  However, a client who pursues incorporation without the proper analysis regarding the appropriate entity choice (corporation, LLC, or limited partnership) could actually find themselves in a worse financial position after formation than they were in when they were at risk for personal liability.

Here's why: upon incorporating, myriad tax and regulatory obligations are imposed on businesses. These obligations frequently require an adaptation of the administrative processes used pre-incorporation.  A company that fails to adapt may become aware of the applicable taxes and laws after the fact and after statutory penalties for non-compliance have been imposed.

Additional Liability Risks from Insufficient Counsel

An improperly managed corporation can also have its “corporate veil” pierced, which will result in personal liability for any shareholders and defeat the primary objective of incorporating-- preventing personal assets from being reached by a creditor of the company.

Many of my clients are nervous about navigating these very complex tax and regulatory waters.  No business is too small or too simple to require proper advice and counsel at startup.  When it comes to the assessment of penalties and interest for non-compliance, the IRS, State Department of Taxation, Ohio Bureau of Workers’ Compensation and other agencies that are owed funds will not make an exception due to a company’s size or lack of sophistication. 

The ill-advised business owner who tries to save some money in startup expenses may end up spending the difference in accounting expenses fighting an audit, or attorney fees defending itself against an aggressive trial lawyer trying to reach the personal assets of a corporate shareholder.

Therefore, instead of clicking over to Legalzoom.com, or identifying the other legal self-help site-du-jour on Google, you may want to consider consulting a legal professional to advise you through start up.  The peace of mind that comes from knowing the appropriate entity was selected and the work was done right the first time should offset any out of pocket expenses paid to your attorney.

Thank you once again for your time, and please come back often to learn more about legal topics that may be of interest to you.

Posted by Aaron Harrison on December 4th, 2008    0 comments
The Value of Comprehensive Estate Planning

In this my second Blog entry, I want to address an issue that many people go to great lengths to avoid thinking about: death.

Although it is at best an unpleasant topic, it is one that is necessary to consider in order to prevent your loved ones from the additional heartache and headaches that can result from inadequate advance planning. In order to minimize this added stress, it makes sense for most people to prepare a comprehensive estate plan.

Most people I talk to are intimidated by the word "comprehensive." I think that is due to the fact that many believe the term (when used by a lawyer) is simply a synonym for "expensive."

However, what comprehensive really means is that you are advised of all of the documents available to address the foreseeable situations that you or your family may encounter towards the end of your life.

For most people, a comprehensive estate plan involves more than just naming the beneficiaries who will receive their property. It includes appointing a guardian for any minor children you may have, as well as addressing the way in which your children receive their inheritance in the unfortunate event something happens to you before your children are able to manage a potentially significant sum of money.

Powers of attorney for medical and financial decisions are also advisable, as well as instructions and advance directives regarding end of life care and, in some situations, instructions regarding funeral arrangements.

Many clients require tax planning as well. In such situations, estate tax owed on the value of your assets at your death can often be minimized, or even potentially eliminated through appropriate planning techniques.

Finally, a review of your assets is always useful. From a legal standpoint, this review may uncover the need to transfer assets to allow a non-probate transfer to a spouse or your next of kin. Also, from a practical standpoint, this review may reveal an aspect of your financial situation that warrants further review, such as life insurance, retirement planning or the like.

The value of a comprehensive estate plan comes not only from the peace of mind that results when the documents are signed, but also from the fact that it permits the consideration of issues that are otherwise easy to ignore.

If you are interested in learning more about the estate planning process, feel free to contact me to arrange an appointment. If you have already scheduled an appointment, please take a moment to review and complete my estate planning questionnaire. It contains a summary of much of the information we will address in our first meeting.

Thank you once again for your time, and please visit often to learn more about legal topics that may be important to you.

Pursuant to Circular 230 promulgated by the Internal Revenue Service, please be advised that this summary is not intended or written to be used, and that it cannot be used, for the purpose of avoiding federal income tax penalties unless otherwise expressly indicated.

Posted by Aaron Harrison on September 2nd, 2008    0 comments
Hello

Greetings! I am Aaron Harrison; thank you for taking the time to visit my website, and I would like to welcome you to the first installment of my legal “Blawg” spot.

I intend to use this portion of my site to personally address my visitors, and to speak to legal issues that may be of general interest to clients and prospective clients alike. From time to time I may address certain current events and other issues of legal significance. I hope you will find it useful. Please check back often, as I intend to update this portion of my site regularly.

Today I would like to offer some insight to my philosophy in opening up my own law office. Although I have been an attorney for nearly three years, this is my first opportunity to pursue the practice of law without the administrative support of a larger firm. I have been humbled in the course of the past month by the support, advice and assistance I have received from my family, colleagues and clients as I have made the transition from a local firm into my own practice.

This experience confirms how many wonderful people live and work in Medina County. The abundance of quality people is the reason I make my home and business here, and why I did not hesitate when given the opportunity to open my own practice. In addition to confirming what I already knew about the people in this area, this has served to further focus my mission for my firm: to offer my clients sophisticated legal service and counsel that exceeds client expectations for quality, professionalism, and ethical advocacy.

Thank you for taking the time to read my first entry.

Aaron

Posted by Aaron Harrison on July 25th, 2008    5 comments